In early to mid-December, magnesium prices came under pressure and declined. Multiple stakeholders in the main production areas entered discussions to explore solutions for the magnesium market’s challenges. As a result, the downward trend in magnesium prices was hindered, and prices exhibited range-bound fluctuations. With these concerted efforts, can the market embark on an upward cycle?
From the perspective of the magnesium market’s supply-demand pattern:
Supply side, recent Fugu magnesium prices fluctuated rangebound between 15,500–15,800 yuan/mt. Profits in the main production area narrowed significantly, with some producers even facing losses. The likelihood of production resumptions driven by profitability has greatly diminished. However, favorable winter temperatures have boosted workers’ enthusiasm for production. In November, output at several magnesium plants in the main production area showed an upward trend, and December production is expected to hold up well. In other provinces, except for Xinjiang, many magnesium producers are grappling with severe losses. Some have opted for maintenance or production cuts, and December output is projected to decline. Overall, primary magnesium production in December is forecast at 105,000 mt, up 4.6% MoM.
Demand side, magnesium alloy demand has grown noticeably. Leading magnesium alloy enterprises have orders scheduled through February, and the supply gap in the magnesium alloy market continues to widen. Currently, primary magnesium producers in the main production area are pivoting toward transformation. Shaanxi’s magnesium alloy output is growing rapidly, with December production expected to reach 46,000 mt, up 7.9% MoM.
Analysis of the Magnesium Market Outlook
The current supply-demand mismatch in the magnesium market is forcing prices into a persistent decline. The surge in magnesium alloy demand is well-timed. Losses in the magnesium metal smelting segment are driving producers to transform, offering an alternative path to resolve the market’s challenges. Specifically, Shaanxi’s primary magnesium output in December is projected at 69,000 mt, while magnesium alloy production in the province is expected to be 6,000 mt. It is estimated that 5,000 mt will bypass the magnesium ingot stage and flow directly into the magnesium alloy market this month, enabling producers to turn losses into profits. According to SMM, one new magnesium alloy producer in Shaanxi is expected to commence operations in January, and another existing producer will ramp up output. Support from the magnesium alloy market for the primary magnesium market is set to strengthen further. Additionally, against the backdrop of nationwide pressure on magnesium ingot prices, Shaanxi's magnesium ingots, leveraging their relative cost advantages, have been able to fill the supply gap created by losses in other provinces. At the same time, driven by regional cost differences in magnesium ingots and the sustained growth in demand from the magnesium alloy market, procurement demand for magnesium ingots in other magnesium alloy production areas continues to rise. However, this portion of demand is somewhat mitigated by the substitution support from scrap.
Overall, the expansion of the magnesium alloy market still requires time. In the short term, the supply-demand imbalance in the magnesium market is unlikely to reverse through internal demand, and the market will remain under pressure. SMM will continue to monitor developments in major production areas and stay updated on relevant news in real time.
