Supply and Demand Both Rising Amid Tug-of-War,China's August Magnesium Market Enters Critical Test Window [SMM Analysis]

Currently, domestic magnesium prices in China remain range-bound at low levels with significantly narrowed fluctuations. Combined with industry professionals taking summer holidays and a quiet market news front, overall trading sentiment remains subdued. As the market enters the critical August window, magnesium prices are approaching a new turning point, where supply-demand dynamics, regional supply disparities, and cost support will jointly dictate the market's trajectory.

Supply Side:

In July, concentrated maintenance outages at primary magnesium smelters led to a substantial contraction in output, with a notable month-on-month decline. According to SMM survey data, as maintenance at major producing regions gradually concludes in August, primary magnesium production is set to recover modestly, with an estimated month-on-month increase of over 4,000 tonnes—though the overall growth remains limited. Moreover, the output recovery shows a regionally divergent trend: supply increments in Shaanxi will be partially offset by production declines in Xinjiang, resulting in a moderate nationwide supply rebound. In July, the magnesium market achieved modest destocking, indicating a slight improvement in supply-demand fundamentals, though the destocking magnitude was not pronounced. In August, while the national supply sees a marginal increase, coupled with the approaching end of the overseas summer holiday and the off-season for die-casting, overall inventory accumulation pressure remains manageable. However, as Shaanxi—the core producing region—sees local supply growth exceeding the national average, compounded by lagging inter-regional cargo allocation, magnesium prices are expected to face certain downward pressure in mid-to-late August.

Demand Side:

In August, magnesium alloy supply is bottoming out and stabilizing, with production poised for a slight rebound. However, constrained by persistently weak demand from the two-wheeled electric vehicle sector, the overall incremental growth in magnesium alloys remains limited. In the export market, as the overseas summer holiday concludes, previously backlogged orders are gradually being released. With downstream restocking demand entering the market, overseas demand for magnesium ingots may see a modest recovery.

Outlook:

Overall, the domestic magnesium market in August will exhibit a pattern of simultaneous growth on both the supply and demand sides. Primary magnesium smelter inventories will increase compared to July, but overall pressure remains controllable. Currently, robust coal prices provide strong cost support for magnesium prices, lending resilience to price movements. Meanwhile, as supply gradually recovers, smelting enterprises face mounting pressure to sell their output. It is expected that magnesium prices will remain relatively firm in August underpinned by cost support, while in mid-to-late August, the concentrated supply release in Shaanxi will make the阶段性承压 (phased downward pressure) more pronounced.