The output of magnesium ingots in March decreased by 2.6% MoM. Can the oversupply be alleviated in April?

China’s magnesium ingot output stood at 64,837 mt in March, down 2.6% MoM and 2.3% YoY.

Magnesium ingot output continued to decline in March, as some magnesium plants implemented maintenance plans based on funding and costs.

At the beginning of March, magnesium prices kept falling due to oversupply and tight funds. In order to ease financial pressure, magnesium plants continued to lower prices to stimulate downstream purchases, resulting in lower profit margins. Magnesium prices fell below the cost line, and some plants chose to lower operating rates or stop production to reduce supply, leading to lower output.

Some magnesium plants started maintenance at the end of March, and the remaining magnesium plants scheduled the maintenance time in mid-to-early April. There are 6 magnesium plants that will be undergoing maintenance recently, and the maintenance time ranges from half a month to one month. The news of magnesium plant reduction and suspension of production has fully fermented. The demand accumulated during the Qingming Festival and the demand for advance stocking for May Day have been released in a concentrated manner. Magnesium ingots have been traded in large volumes, and the inventory pressure of magnesium ingots has been reduced. The price of magnesium ingots has gradually strengthened at the support level of 18,000 yuan/ton.

On the demand, overseas orders received at low prices were delayed in delivery due to the rising price of magnesium ingots. As the magnesium price is expected to have limited room for decline, the delivery of overseas orders is more difficult. The price of overseas orders was raised in early April, but the order volume was limited.

Taking into account that the companies that had undergone maintenance gradually resumed production in mid-to-late April, coupled with the pessimistic expectations for inventory preparation before the May Day holiday, inventory may once again grow in mid-to-late April.