High Costs and Cautious Demand in a Stalemate, Magnesium Market Continues to Fluctuate Rangebound Before the Holiday [SMM Magnesium Weekly Review]

1 Market Review

1 Dolomite

This week, the ex-factory price, excluding tax, for 1-3 cm dolomite (Wutai) was 108 yuan/mt, flat WoW; the price for 2-4 cm dolomite (Wutai) was 138 yuan/mt, flat WoW.

This week, the domestic dolomite market operated steadily overall. Supply side, leading producers in the Wutai region continued to suspend production and sales, leading to tightening supply of high-quality material locally; however, other production areas promptly ramped up output to fill the regional supply gap, preventing a nationwide tight supply situation. Demand side, primary magnesium enterprises in the Shaanxi-Shanxi-Inner Mongolia region maintained stable operations, with rigid demand for dolomite being released steadily; most producers maintained ample inventory, providing support for stable market conditions. Furthermore, with the Chinese New Year approaching, logistics and transportation demand increased, pushing up freight costs and consequently raising the delivered cost of dolomite. Considering supply-demand and cost factors, dolomite prices held up well.

1.2 Magnesium Ingot

1.2.1 Magnesium Ingot (Fugu, Shenmu - Main Production Areas)

This week, magnesium prices were in the doldrums. As of press time, the mainstream transaction price for 99.90% magnesium ingot in the main production areas fell to 16,400 yuan/mt, down 200 yuan/mt from last Thursday.

This week, magnesium prices fluctuated rangebound. Supply side, leading primary magnesium smelters showed a weak willingness to sell, keeping their offers firm; small and medium-sized smelters faced increased pressure for capital return, leading to more instances of selling at lower prices, which dragged down the mainstream transaction prices slightly. Cost side, intensified losses in semi-coke production contributed to rising coal gas costs, significantly pushing up the smelting cost for primary magnesium, with the cost support effect being notable. Overall, strong support from the cost side kept magnesium prices generally firm.

1.2.2 Magnesium Ingot (Tianjin Port - FOB China)

This week, the FOB China price was quoted at $2,320-2,380/mt, with an average price of $2,350/mt. This week's FOB quotes moved in line with ex-factory prices, showing an overall weaker tone.

Order intake in the overseas market was moderate this week, but most orders were for forward delivery, concentrated mainly in Q2. Consequently, producers' ex-factory prices currently lack room for reduction. Currently, downstream users and traders generally adopted a wait-and-see attitude, market demand was sluggish, and overseas inventories continued to accumulate. Market expectations suggest a new order window might open in late February.

1.3 Magnesium Powder

This week, the mainstream tax-included ex-factory price for 20-80 mesh Chinese magnesium powder was 17,550-17,750 yuan/mt; the FOB China price was $2,480-2,540/mt.

This week, the magnesium powder market operated steadily overall, with industry production schedules proceeding orderly. Demand side, the domestic trade market continued purchasing as needed pace, while new orders in foreign trade were limited overall. At the beginning of the week, driven by the pullback in raw material magnesium ingot prices, magnesium powder enterprises conducted some procurement in a timely manner, and overall market trading activity remained moderate.

1.4 Magnesium Alloy

This week, the mainstream tax-inclusive ex-factory price of magnesium alloy in China was 18,600-18,800 yuan/mt, and the mainstream FOB price was $2,600-2,650/mt.

The magnesium alloy market this week showed a pattern of benchmark prices declining while processing fees held steady. Cost side, the weekly average price of the main raw material, magnesium ingot, dropped by 200 yuan/mt, leading to some weakening in cost support; auxiliary material A00 aluminum ingot prices fluctuated at highs, providing some cost support. Supply and demand, magnesium alloy producers operated normally, while downstream die-casting and end-user enterprises slowed down procurement pace as the Chinese New Year holiday approached. Overall, the current market supply-demand maintained a tight balance, providing strong support for processing fees. Magnesium alloy processing fees are expected to remain firm in the short term.

2 Weekly Summary

This week, the magnesium market overall showed a pattern of stable supply and demand alongside strengthened cost support. Raw material dolomite prices remained firm due to supply tightens in main production areas and rising logistics costs. Magnesium ingot costs increased significantly affected by losses in semi coke, but prices pulled back slightly to around 16,400 yuan/mt influenced by enhanced cash collection willingness among small and medium manufacturers and sluggish transactions. Both domestic and foreign trade markets were dominated by long-term orders, with downstream players generally adopting a wait-and-see attitude. Trading in the magnesium powder and magnesium alloy markets was steady, with magnesium alloy processing fees remaining firm amid cost fluctuations. Overall, the current market fluctuated rangebound between cost support and demand wait-and-see, and it is expected to continue consolidating ahead of the holiday.