Chinese magnesium squeeze persists, forces suppliers to postpone sales: sources

China's magnesium supply squeeze has remained persistent over the last few weeks, leading some suppliers to postpone their ingot sales for later deliveries, industry sources said Dec. 13.

In the week through Dec. 10, Fugu Xintian Magnesium Alloy offered 99.9% magnesium ingot price at Yuan 42,000/mt ($6,593/mt) and Shanxi Wenxi Xinye Trading offered ingot with similar specifications at Yuan 40,000/mt, according to the companies.

Meanwhile, Shanxi Jiuling Jiamei Metal was offering at Yuan 41,000/mt and Fugu Yabo Semi-Coke at Yuan 39,000/mt, data from the companies showed.

After a rise in safety inspection activities at key magnesium hubs and a severe supply shortage, China's magnesium prices recently breached a crucial level for the first time in weeks, going past the Yuan 40,000/mt mark, sources said.

In early December, China's Ministry of Ecology and Environment stationed safety inspectors in Shaanxi, where they will remain through Jan. 4, 2022, keeping a close watch on the magnesium sector.

However, at present, it was difficult to estimate direct impact on local magnesium operations, industry players said.

December prices are much higher than the 2020 average domestic magnesium prices of Yuan 13,556/mt, data by the China Nonferrous Metals Industry Association showed.

Despite the current state of price trend, offers have stayed far off from an all-time high level when ingot prices hit Yuan 71,000/mt in September, according to the CNIA.

Spot domestic magnesium supply has remained tight in the second week of December, forcing smelters to sell and deliver on later dates, according to producer Shaanxi Magnesium Industry.

Some mainstream magnesium smelters in the Fugu county of Shaanxi province quoted ingot price at Yuan 40,000/mt, with actual deals done at Yuan 39,500/mt, the group said.

Some smelters have lined up production to meet orders for later delivery, while some others declined to accept buyers' ingot bookings, and instead decided to wait and watch, according to the group.

Fugu county in China's Shaanxi province is the world's largest magnesium production hub, having more than 35 magnesium smelters and an aggregate output capacity of more than 700,000 mt/year, accounting for more than 50% of China's total, the CNIA said.

The county is now building a magnesium ingot, magnesium-based new materials and magnesium alloy products industry value chain, aiming to lift its total magnesium ingot and alloy output capacity to 1 million mt/year by the end of the 14th Five Year Plan period (2021-2025) from the current more than 700,000 mt/year capacity, according to the CNIA.

On the demand side, some buyers from the downstream sector with utmost need have gradually replenished ingot stocks despite the price rally and squeezed supply, while some others are in not a position to accept high prices and rather wait, according to Shaanxi Magnesium Industry.