Cost-Inventory Tug-of-War Consolidates the Magnesium Industry Chain in Search of a Bottom [SMM Magnesium Weekly Review]

1 Market Review

1 Dolomite

This week, the ex-works price of 1-3 cm dolomite (Wutai) excluding tax was 128 yuan/mt, flat WoW, and the ex-works price of 2-4 cm dolomite (Wutai) excluding tax was 158 yuan/mt, flat WoW.

This week, delivered prices of dolomite in China stabilized overall. On the supply side, the core large dolomite mine in Wutai, Shanxi remained suspended, tightening the circulation of local high-grade ore and keeping regional supply tight. Primary magnesium smelters adjusted their procurement strategies by extending their purchasing radius, with producing areas such as Hebi in Henan, Datong in Shanxi, and Shiyan in Hubei becoming the main replenishment directions. Overall market supply trended toward sufficiency, easing the supply-demand imbalance. In terms of prices, delivered quotations across producing areas showed no notable fluctuations this week, with mainstream prices holding firm. In the short term, before mine resumption news becomes clear, prices are expected to remain largely stable.

1.2.1 Magnesium Ingot (Fugu and Shenmu - Main Producing Areas)

This week, magnesium prices were initially weak and then strengthened. As of press time, mainstream quotations for 99.90% magnesium ingot in the main producing areas were 15,850-15,950 yuan/mt, down 50 yuan/mt WoW.

This week, China's magnesium prices showed a volatile pattern of first falling and then rebounding, with significant swings in market sentiment. At the start of the week, dragged by the continued decline in raw material coal and ferrosilicon prices from the previous week, pessimistic expectations spread in the market. Suppliers sold aggressively at low prices to accelerate cash collection, leading to a concentrated release of spot transactions and a rapid decline in the magnesium price center. As prices fell to the 15,800 yuan/mt level, downstream restocking willingness at low prices strengthened, and market transactions gradually recovered. However, social inventory remained at a relatively high level, and supply pressure was not substantially alleviated. Magnesium prices failed to stop falling and stabilize, subsequently dipping further to a weekly low of 15,700 yuan/mt. In the latter half of the week, coal prices showed signs of rebounding, cost support re-emerged, and combined with the continued recovery in low-price transactions, magnesium prices gained support from both sides and rebounded slightly. Overall, this week's magnesium prices were in a pattern of consolidating and seeking a bottom amid the tug-of-war between costs and inventory.

1.2.2 Magnesium Ingot (Tianjin Port - China FOB)

This week, China's FOB price was quoted at $2,250-2,350/mt, with an average price of $2,300/mt. This week's magnesium ingot FOB price was down $20/mt WoW.

This week, the magnesium ingot foreign trade market was in the doldrums. On the supply side, China's magnesium ingot market was initially weak and then strengthened, with firm quotations from producers and reduced low-priced cargoes, limiting further downside room for magnesium ingot FOB prices. On the demand side, overseas demand did not materially improve, and the previously expected recovery after the summer break and the September-October peak season failed to materialize effectively. Affected by weak demand, traders generally remained on the sidelines, and with repeated market fluctuations, market confidence was insufficient. In the short term, export orders show no clear signs of recovery, and firm domestic quotations are suppressing overseas purchase willingness. The foreign trade market is expected to continue consolidating.

1.3 Magnesium Powder

This week, mainstream tax-inclusive ex-works prices of 20-80 mesh magnesium powder in China were 17,050-17,150 yuan/mt; China's FOB price was $2,410-2,510/mt.

This week, magnesium powder prices followed magnesium ingot in a pattern of initial weakness, then stabilization, and a slight rebound thereafter. The magnesium powder market lacked independent momentum recently, with price movements entirely dependent on upstream magnesium ingot. On the raw material side, ex-works prices of magnesium ingot rose, and magnesium powder producers rigidly passed through alloy processing fees, with quotations rising in tandem. On the demand side, there was no material improvement, with end-users in fireworks, metallurgical additives, and 3D printing maintaining only rigid small-order procurement, with no concentrated restocking. Overall, this week's rise in magnesium powder was a follow-through rally driven by the bottom repair of magnesium ingot, and the subsequent trend may still be determined by magnesium ingot prices and downstream stockpiling pace before the two holidays.

1.4 Magnesium Alloy

This week, mainstream tax-inclusive ex-works prices of magnesium alloy in China were 17,700-18,000 yuan/mt, and mainstream FOB prices of magnesium alloy in China were $2,565-2,645/mt.

This week, China's magnesium alloy market saw both supply and demand weaken, with alloy processing fees remaining under pressure. On the supply side, smelters, affected by both deepening losses and reduced orders, continued production cuts and maintenance, keeping market supply at a low level. However, earlier social inventory remained high, spot cargoes were ample, suppliers showed strong willingness to sell, and low-price competition among peers was widespread, meaning supply pressure was not significantly alleviated by production cuts. The demand side was even weaker. Since the end of last month, downstream die-casting enterprises, due to insufficient end-use orders, maintained low operating rates, with some enterprises still in a state of production suspension. Actual procurement volume of magnesium alloy shrank sharply, with downstream mainly making rigid small-batch restocking and maintaining a strong wait-and-see sentiment. Against the backdrop of weak supply and demand, the oversupply pattern of magnesium alloy remained unchanged. In the short term, before downstream demand materially recovers, magnesium alloy processing fees will remain in the doldrums.

2 Weekly Summary

This week, dolomite prices remained stable. Affected by fluctuations in coal and ferrosilicon prices, magnesium ingot in the main producing areas showed a volatile pattern of first weakening and then strengthening. At the start of the week, falling raw material prices dragged magnesium prices lower, and after prices dipped, downstream restocking at low prices drove a slight rebound in magnesium ingot. However, social inventory remained high, and supply pressure persisted. FOB prices followed the domestic market downward, overseas demand did not recover as expected, the September-October peak season expectations fell through, traders mainly stayed on the sidelines, and further downside room for prices was limited. Meanwhile, downstream magnesium powder prices followed magnesium ingot in a volatile rally, with end-users making only rigid small-order purchases and no concentrated restocking. Magnesium alloy saw both supply and demand weaken, with production cuts at the smelting end but high existing inventory, low operating rates and insufficient orders at downstream die-casting enterprises, and alloy processing fees remaining under pressure. Overall, this week's magnesium industry chain was caught in a tug-of-war between costs and high inventory, end-use demand did not materially improve, and the short-term market continued its pattern of consolidating and seeking a bottom.