After nearly half a month of a tug-of-war between sellers and buyers in the magnesium market, the future trend has been determined, with the supply-demand balance tilting once again toward downstream buyers. Recently, magnesium prices have shown a slow downward trend. As of the time of writing, the price of 99.90% magnesium ingot in the main production areas has fallen below the 17,000 yuan/mt mark, with mainstream quotations from magnesium plants ranging around 16,800-16,900 yuan/mt. However, considering that although magnesium plant inventories have increased, they remain at a multi-year low, has the downward channel for magnesium prices already opened?
Supply side, primary magnesium supply in August remained relatively low (primary magnesium production: 80,500 mt, magnesium ingot production: 71,000 mt). According to an SMM survey, some primary magnesium smelters are scheduled to undergo planned maintenance shutdowns during different periods in September. Based on SMM calculations, the affected production from these maintenance shutdowns is approximately 3,000 mt. Consequently, expectations for growth in primary magnesium production have weakened, and primary magnesium output in September is forecast at around 76,000 mt.
Demand side, breaking it down: Magnesium powder production in August was 7,494 mt, down 10.41% MoM. Affected by sluggish demand from end-user steel mills and raw material substitution, domestic magnesium powder demand performed weakly. Recently, foreign trade demand saw a significant decline in orders due to the impact of Announcement No. 17. Magnesium powder demand lacks strong support. In September, magnesium powder demand may still be constrained in the short term by Announcement No. 17, presenting negative feedback on magnesium ingot demand. Magnesium alloy production in August was 32,850 mt, up 0.77% MoM. Supported by demand from various application fields such as terminal NEVs, EVs, and humanoid robots, magnesium alloy demand strengthened. However, its support for magnesium ingot demand itself is limited, primarily because most magnesium alloy producers are integrated enterprises covering the entire industry chain, with externally purchased magnesium ingot accounting for about 21.30%. Thus, alloy demand support mostly provides a floor for magnesium ingot prices. Recently, some magnesium alloy producers reported tight magnesium alloy supply. Under demand support, magnesium alloy output is expected to show an upward trend going forward, and the magnesium alloy market will provide bottom support for magnesium ingot demand. Sponge titanium production in August was 20,900 mt, down 9.39% MoM. Sponge titanium producers responded to the national anti-involution policy, leading to a reduction in sponge titanium output. Furthermore, the current specific consumption of magnesium ingot for sponge titanium remains stable, resulting in generally modest support for magnesium ingot demand from sponge titanium. Considering that some sponge titanium producers place quarterly orders for magnesium ingot, the procurement cycle for magnesium ingot might be adjusted. However, due to the psychological expectation of "rushing to buy amid continuous price rise and holding back amid price downturn" among downstream purchasers, magnesium ingot procurement plans might be delayed. Additionally, inventory pressure in the sponge titanium market in September still requires production cuts to alleviate pressure, indicating that demand support from sponge titanium remains insufficient.
Looking back at early September, the main reason for the earlier decline in magnesium prices still lies in the impact of market expectations on supply and demand behavior. On the demand side, influenced by the "rush to buy amid continuous price rise and hold back amid price downturn" mentality, market procurement was delayed. On the supply side, considering inventory pressure and the psychological expectation that selling earlier is more advantageous, suppliers actively offloaded stocks. In recent magnesium market operations, magnesium producers have shifted from occasionally offering low-priced sources to proactively selling at lower prices, and market behavior has confirmed this trend. Will magnesium prices show a unilateral downward trend? Demand in the magnesium market did improve in September. Based on the trading volume over the past week, transactions exceeded 1,000 mt for four consecutive working days. Subsequently, the magnesium market may see broad transactions at a consensus period, leading to a bottoming out. However, in the long term, the rebound in magnesium prices is expected to be short-lived, and prices may continue to be guided by supply and demand fundamentals, operating under pressure again.
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