Shaanxi primary magnesium saw sharp production cuts of over 20% in July, marking the largest decline this year; can supply-demand growth in August drive magnesium prices to break through? [SMM Analysis]

Mg prices moved sideways within the 15,650-16,000 yuan/mt range in July 2026, with an average monthly price of 15,835 yuan/mt, down 2.55% MoM.

Entering July, the price fluctuation band continued to narrow, and the market was locked in a consolidating stalemate with neither side able to break out. At end-June, magnesium ingot prices kept falling and broke below 16,000 yuan/mt, severely squeezing profit margins for primary magnesium smelters. Affected by cost pressure, many primary magnesium smelters in the main production area of Shaanxi began maintenance and output cuts. According to the SMM survey, a total of 18 magnesium plants in Shaanxi implemented production cuts in July, and primary magnesium production is expected to drop 22.81% MoM. Supply contracted significantly, easing the accumulation of producer inventories. However, this positive was offset by the overseas summer break and shrinking domestic alloy demand. In July, the magnesium market exhibited weak supply-demand dynamics, and prices remained range-bound. Under current conditions, how will the magnesium market landscape evolve, and what trend will magnesium prices take in August?

In July 2026, Shaanxi’s primary magnesium production is expected to drop by nearly 15,800 mt MoM, a decline of 22.81%. This round of production cuts by magnesium plants is likely the largest production adjustment of the year. The reasons: On one hand, at the start of the year, the market formed a consensus on an impending boom in magnesium alloy demand. Improving downstream demand and speculative capital inflows drove a rapid rise in market demand. However, subsequent magnesium alloy demand growth fell short of expectations. The primary magnesium capacity released from earlier commissioning and expansion created a supply overhang, resulting in a clear supply-demand mismatch. Smelters faced triple pressures of cost, inventory, and capital, forcing some primary magnesium smelters to suspend operations for maintenance. On the other hand, the harsh operating conditions for some positions in the high summer temperatures make concentrated summer maintenance a regular seasonal practice in the magnesium industry.

Looking ahead to August, estimates suggest that Shaanxi’s primary magnesium production may rise 14.13% MoM, with supply undergoing a recovery. Although some plants still have planned maintenance in August, the increase from resuming production at capacities undergoing maintenance in July will outweigh the reduction from ongoing maintenance, leading to a modest rebound in regional primary magnesium output.

Outlook

In early August, the magnesium market is likely to continue its weak supply-demand dynamics. In the near term, industry operating rates remain low, but overall downstream demand is sluggish, and the destocking pace is slowing down, capping upside room for magnesium prices and keeping the market moving sideways. Entering mid-to-late August, the market is expected to shift to a dual supply-demand growth pattern. Export orders are characterized by concentrated procurement, which may widen the price fluctuation range. Overall, the subsequent direction of the magnesium market will depend on the relative pace of supply recovery and demand rebound.