Magnesium Plants' Hidden Costs Pull Back, Releasing Benefits; September Raw Material Market Sees Price Divergence Amid Tug-of-War Between Longs and Shorts [SMM Domestic Analysis]

In September 2025, the cost structure is expected to feature stable raw material costs and a decline in hidden costs. On the raw material side, dolomite prices may see upward momentum due to reforms in the tender model, with strong support from a 5.7% MoM increase in magnesium smelting production to 85,000 mt; the ferrosilicon market remains oversupplied with weak demand, characterized by high inventory levels and electricity price support; in terms of energy costs, lump coal faces pressure due to a loose supply-demand pattern, while semi coke prices remain firm due to maintenance cycles. Regarding hidden costs, the return to moderate temperatures boosts smelting efficiency by 10%-15%, with the cancellation of heat prevention expenses and enhanced production stability driving a significant pullback in overall costs.

Dolomite: In September 2025, leading dolomite suppliers in Wutai will gradually adopt a tender-based sales model for dolomite. This change in transaction mode could strengthen the upward momentum of dolomite prices. On the demand side, the proportion of dolomite used by major magnesium smelters in Hubei and Inner Mongolia has increased, with limited impact from the change in transaction mode. Additionally, primary magnesium production is on an upward trend, with September's output projected to rise to 85,000 mt, up 5.7% MoM. Given the anticipated increase in dolomite demand, the upward momentum of dolomite prices is likely to intensify.

Ferrosilicon: The ferrosilicon market presents a complex situation. Recent high levels of ferrosilicon production, coupled with the end of steel mill production restrictions and the traditional peak demand season, provide some demand support. Cost-wise, higher electricity prices offer support. Overall, the current ferrosilicon market shows a pattern of strong supply and weak demand, with a slight accumulation of production site inventory. The likelihood of a significant short-term shift in this situation is low, and future price fluctuations will depend on market disruptions brought about by new information.

Energy Costs: Recently, steel mills in North China have entered a period of equipment maintenance, and as high-temperature weather eases, the demand for coal from high-energy-consuming industries has weakened. Affected by multiple factors, downstream demand is insufficient, with fewer trucks transporting coal from mines, leading to a pull back in lump coal prices. It is expected that coal demand may further decline in September. Moreover, enhanced safety inspections at mines around Beijing have led some producers to halt production after completing their monthly tasks, resulting in a tightening of lump coal supply. It is anticipated that coal supply will increase in September. Overall, the fundamental picture for lump coal in September is one of strong supply and weak demand, putting pressure on lump coal prices. Some semi coke enterprises plan to suspend production for maintenance in early September, resuming operations gradually in mid-to-late September, with semi coke prices expected to remain firm.

Hidden Costs: With temperatures returning to a comfortable range in September, the high-temperature working conditions in magnesium plant workshops have fundamentally improved, significantly reducing employee absences and restoring team stability. This effectively avoids the issue of decreased production efficiency caused by staff shortages in July. At the same time, suitable temperature conditions made the operation of smelting equipment more stable, with the smelting cycle shortened by 10%-15% compared to July, reducing the additional time costs and energy consumption caused by extended production processes. In addition, as the high-temperature season ended, the extra expenses incurred by companies for heatstroke prevention, cooling, and equipment overload protection against extreme weather were also canceled, further promoting the pull back in hidden costs.