Pre-Labour Day Holiday Restocking and Stockpiling, Suppliers' Offers Remained Firm, Magnesium Prices Rose for Two Consecutive Days [SMM Commentary]

SMM April 29:

On the eve of the Labour Day holiday, the magnesium market trading atmosphere recovered in the first half of this week, with spot prices continuing to hold up well and magnesium prices rising for two consecutive days. Current market support mainly came from the sustained release of pre-holiday end-user rigid stockpiling demand, with downstream procurement pace following in an orderly manner, effectively boosting trading activity. On the other hand, rising coal and ferrosilicon futures prices on the raw material side also provided certain cost support for the magnesium market. Supported by multiple positive factors, suppliers generally maintained firm pricing sentiment, low-priced supplies in the market gradually diminished, and the overall magnesium market showed a generally stable with slight rise trend.

Magnesium prices rose for two consecutive trading days

Spot price: Magnesium ingot and magnesium alloy continued the upward trend from April 28. Specifically, the SMM 99.90% magnesium ingot (Fugu, Shenmu) price on April 29 was 16,600-16,700 yuan/mt, with an average price of 16,650 yuan/mt, up 0.3% from the previous trading day.

The core driver behind this two-day consecutive magnesium price increase was pre-holiday restocking demand from downstream end-users. As the Labour Day holiday approached, considering the holiday factor, downstream deep-processing and manufacturing enterprises initiated stockpiling operations in advance, and market procurement enthusiasm improved compared to the previously sluggish conditions. Most downstream enterprises abandoned their earlier wait-and-see sentiment and entered the market to purchase based on their own rigid production needs, proactively locking in spot inventory to hedge against post-holiday supply fluctuation risks. The sustained concentrated restocking demand rapidly consumed previously accumulated low-priced inventory in the market, with low-priced resources basically digested and cleared, the market price floor continued to rise, directly driving consecutive magnesium price raises. Overall trading activity and transaction atmosphere in the first half of this week both improved.

Outlook

Based on the current supply and demand performance, the concentrated release of pre-holiday restocking demand effectively reversed the previously weak market sentiment, boosting confidence among traders and producers to a certain extent. However, from the market pace perspective, after a round of concentrated restocking, downstream stocking demand had been gradually released, and the pre-holiday restocking trend was essentially coming to an end. As the Labour Day holiday approached,market procurement activities gradually ceased, and concentrated trading momentum was expected to pull back. Based on current market conditions, domestic magnesium prices were expected to remain generally stable in the short term.

In the long term, the domestic magnesium market needs to focus on two aspects going forward: first, the maintenance schedules and production pace changes of domestic magnesium ingot producers — if mainstream smelters arrange concentrated equipment maintenance and production cuts later, this would directly compress overall market supply, alter the current supply-demand balance, and drive price fluctuations; second, the recovery of demand in markets outside China — currently, ex-China magnesium product demand remained generally stable but weak, and whether export orders could steadily increase and whether the export market could recover would directly affect domestic magnesium ingot exports, becoming a key factor influencing medium and long-term magnesium price trends.