Recently, the magnesium market has frequently reported rising prices of raw materials such as ferrosilicon, coal, and dolomite. Affected by this, sentiment among magnesium plants in the main production areas to hold back supply and cherish sales has intensified, and magnesium prices have steadily increased. How do fluctuations in raw material prices impact magnesium?
Shanxi Dolomite Stirs Again; Dolomite Price Increase Pushes Costs Slightly Higher
Recently, the main raw material required for primary magnesium smelting, Wutai dolomite, raised its quotes: 1-3 material increased to 108 yuan/mt, up 30 yuan/mt MoM; 2-4 material increased to 138 yuan/mt, up 10 yuan/mt MoM. This marks the end of Wutai dolomite's nearly year-long downward pricing cycle.
Since late April, leading dolomite producers in the main production areas began shutdowns for maintenance, and some magnesium plants in the main production areas conducted safety stockpiling of dolomite. Freight prices were once raised due to panic buying by magnesium plants. Leading dolomite producers maintained sufficient dolomite inventory to supply magnesium plants for production consumption. Recently, leading dolomite mines resumed production, and dolomite producers' inventory dropped to low levels. Coupled with increased operating rates at magnesium plants in the main production areas, dolomite consumption has risen. Supported by demand, dolomite prices have increased slightly.
The rise in dolomite prices in the Wutai area will drive up the theoretical production cost of primary magnesium smelting in the Shenfu area. However, considering that magnesium plants currently maintain safety dolomite inventories for three to six months, the impact of Wutai dolomite price increases on the actual production cost of magnesium ingots in the current period is relatively limited. Additionally, some magnesium plants in the Shenfu area purchase dolomite externally from multiple provinces such as Hubei and Inner Mongolia to ensure safe and stable supply. The impact of price increases in any single region is thus diluted. Overall, the impact of dolomite on magnesium ingot production costs is relatively limited.
Ferrosilicon and Coal Prices Fluctuate Upward; Primary Magnesium Smelting Production Costs Rise Significantly
Semi-coke prices and electricity costs remained stable, supporting ferrosilicon prices from the cost side. Moreover, approaching the National Day holiday, some steel companies have restocking needs, and market expectations for peak season demand have strengthened, driving ferrosilicon prices higher. The delivery-to-factory price for 75# ferrosilicon is 5,900-5,950 yuan/mt. Regarding coal, supply recently contracted then expanded. Influenced by factors such as overproduction checks and the "9.3" parade, coal supply was constrained. The delivery-to-factory price for coal increased by about 50 yuan MoM, significantly raising the energy cost for primary magnesium smelting. Although the price of the by-product semi-coke increased correspondingly, effectively amortizing coal costs, considering the reduced transactions due to higher semi-coke prices and the time lag in buying and selling, energy costs continue to show an upward trend.
Market Outlook
Recently, magnesium prices have shown a trend of bottoming out and stabilizing. Although prices of raw materials like ferrosilicon, coal, and dolomite have recently increased, considering the large, concentrated release of orders last week, orders are expected to enter a brief lull. Lacking demand support, it will be difficult for magnesium prices to rise significantly. Prices are expected to fluctuate rangebound in the short term, facing difficulty in both rising and falling.
