Magnesium Prices Rise for Three Consecutive Sessions! Cost Side Remains "Burning Hot" While Demand Side Struggles to Take Over [SMM Commentary]

Affected by safety regulations, the effective supply growth released by coal mine production resumptions in China is limited. Combined with a notable pullback in truck clearances at the Ganqimaodu port, spot coal supply is tight and prices continue to rise. Rising coal prices have driven smelting raw materials such as semi coke and ferrosilicon higher in tandem, with the center of magnesium smelting costs continuing to climb, pushing magnesium prices to a three-session winning streak. However, downstream acceptance of high-priced cargoes is limited, and the magnesium market is currently in a tug-of-war between upstream cost support holding prices firm and downstream weak demand with reluctance to purchase at high prices.

Supported by rising costs, magnesium ingot prices gained 1.86% over three trading days

Spot market:On September 2, the magnesium ingot market showed a pattern of firm prices in the Chinese market and passive increases in the foreign trade market. Taking the average price trend of 99.90% magnesium ingot (Fugu, Shenmu) as an example, the average price on September 2 was 161,000 yuan/mt, up 0.31% from the previous trading day. The average price of 161,000 yuan/mt on September 2 was up 300 yuan/mt, or 1.86%, from 158,000 yuan/mt on August 28.

On the supply side, smelters showed strong willingness to hold prices firm due to rising costs, with offers continuing to push higher, but high-priced sales met resistance and some levels saw no transactions. On the demand side, traders sold at lower levels, downstream purchasing attitudes were cautious, wait-and-see sentiment was thick in the market, and upward price resistance became evident. Although foreign trade FOB prices rose passively along with domestic EXW prices, this round of FOB price increases was not driven by a real recovery in overseas demand, leaving high prices lacking support from actual orders. Overseas downstream acceptance of the price increases was limited, order releases were insufficient, and foreign trade transactions showed mediocre performance.

Outlook

Coal mine production resumptions remain slow, safety supervision pressure stays high, and effective coking coal supply is insufficient. Most coal mines hold coking coal inventories at low levels, with strong sentiment to hold prices firm and hold back from selling. Online auction market interest remains high, and premium transactions are still the mainstream, so the coking coal market is likely to hold up well in the short term.

For the magnesium market outlook, the short-term coal supply gap is difficult to close, and expectations for the fourth round of coke price increases to take effect are heating up, so cost-side support for magnesium prices from raw materials remains. However, both domestic and overseas demand currently lack strong drivers, and magnesium prices are most likely to move sideways in the short term. Going forward, close attention should be paid to price trends for raw materials such as coal, ferrosilicon, and semi coke.