Chinese magnesium prices hit Yuan 55,000/mt on low stocks: sources

Chinese magnesium prices surged significantly in the first week of January, with some offers rising as high as Yuan 55,000/mt ($8,634/mt) amid low stocks, leading buyers, and sellers to adopt a wait-and-watch strategy, industry sources said Jan. 11.

January 2022 prices are much higher than the average monthly prices of Yuan 14,493/mt in January 2021 and Yuan 13,556/mt in January 2020, data from China Nonferrous Metals Industry Association showed.

Magnesium ingot deals were reported at Yuan 49,000-50,000/mt in December 2021, with prices rising to Yuan 50,000-51,000/mt for deals concluded in the first week of 2022, according to state-backed conglomerate Shaanxi Magnesium Industry.

Domestic magnesium prices rose after the New Year's Day holiday, with relatively higher inquiries from end-users Jan. 5, the group said.

Various magnesium smelters in key domestic production bases have low stocks, with suppliers wary of uncertainty around the Chinese environment control policy, leading to firm prices, Shaanxi Magnesium said.

Fugu Xintian Magnesium Alloy offered 99.9% ingot at Yuan 55,000/mt as of Jan. 7, 10% higher than its offer of Yuan 50,000/mt end-December, company data showed. Some other smelters in Shaanxi declined offers due to volatile prices, sources said.

In Ningxia, 99.9% magnesium ingot offers from smelters were at Yuan 51,000-52,000/mt, while offers for similar specifications in Shanxi's Taiyuan and Wenxi were seen at Yuan 52,000-52,500/mt as of Jan. 7, according to commodity information company Zhejiang Netsun.

Some buyers with inflexible demand were purchasing moderate volumes to replenish stocks, according to sources. Most traders and end-users were cautious about purchasing large volumes, according to Shaanxi Magnesium.

Prices surge amid environmental policy concerns

Market players expect Chinese magnesium prices to remain elevated, amid concerns related to policy changes, according to sources.

Buyers and sellers are seeking clarity on China's future environment control policy and its impact on smelting operations after environmental inspections at key magnesium hub, Shaanxi's Yulin city, in December 2021 revealed some irregularities that hurt output, sources said.

Yulin's magnesium sector uses waste gas generated from semi coke production to power smelting. As semi coke production involves high energy consumption and emissions, China in 2012 ordered Yulin's single semi coke furnaces with a capacity below 75,000 mt/year to shut before end-2021.

A total of 23 magnesium smelters with 349 single furnaces, semi coke output capacity of less than 75,000 mt/year and a total capacity of 8.35 million mt/year, were still operational in Yulin as of December 2021, and were non-compliant with rules, according to China's Ministry of Ecology and Environment, or MEE.

Yulin's magnesium output during January-November 2021 fell 5.2% on the year to 474,000 mt, latest data by National Statistics Bureau showed.

Yulin has a semi coke regional capacity of more than 74 million mt/year, MEE data showed.

China's strict environment controls since December 2021 have led to a bull-run in magnesium prices, squeezing supply over the near term, a market observer said at a recent local webinar.

Magnesium supply in Europe and North America is expected to be short due to high prices in China in the first quarter of 2022, according to the observer.