China's magnesium prices soar to Yuan 50,000/mt: sources

Magnesium prices in China surged to Yuan 50,000/mt ($7846/mt) Dec. 27 for the first time in three months, reaching a crucial pricing level as environment controls tightened in domestic magnesium hubs, industry sources said Dec 28.

Shanxi Jiuling Jiamei, Wenxi Xinye Trading, Fugu Yabo Semi-Coke and Xintian Magnesium offered 99.9% ingot at Yuan 50,000/mt as of Dec. 27, according to companies' data.

Meanwhile, Tianyu Magnesium offered ingot of same specification at Yuan 46,000/mt, and Shaanxi Magnesium at Yuan 49,000/mt. All of them are major smelters in the Shaanxi and Shanxi provinces.

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

Prices now have jumped sharply in a span of two weeks when they breached the Yuan 40,000/mt level Dec. 6.

China's magnesium prices still remain far off from an all-time high level of Yuan 71,000/mt, reached in September, which sparked a panic among buyers worldwide.

Price movement

As the year ends and Chinese Lunar New Year approaches, China's magnesium prices are expected to stay at elevated levels amid tight environment controls, state-backed conglomerate Shaanxi Magnesium Industry said.

Several smelters in the Fugu county of Shaanxi province quoted tax-inclusive prices of Yuan 50,000/mt, with some willing to negotiate prices for spot cargoes delivery, according to the group.

Smelters are facing challenges to ink deals on higher prices in recent days, with just traders delivering cargoes, the group said.

Industry players are expecting market sentiments to remain bullish in the near term, so they are insisting on higher prices at a time of squeezed ingot stocks at smelters and strict environment checks, Shaanxi Magnesium said.

Environmental protection staff has remained in Shaanxi's Yulin city from Dec. 4 and will stay through Jan. 4, 2022. As future environment control policies are yet to be announced, such measure's impact on smelting operations remain uncertain, sources said.

Meanwhile, end-users are still reluctant to accept high ingot prices, with only traders involved in active sales, while those with inelastic need are waiting for opportunities to replenish stocks, according Shaanxi Magnesium.

Some smelters have declined ingot offers as environmental inspection activities have created jitters, according to Northeast Asia Magnesia Exchange.

Some smelters were still fulfilling orders that were agreed earlier, but the sector may cut output later, while the downstream sector remains on wait-and-watch mode.

Prices have remained volatile on ingot stock situation, market outlook and environmental policies, which could lead to sharp price movements either way in a smaller timeframe, industry players said.

Out of the 349 single furnaces at 23 Chinese magnesium smelters being inspected, some of their semi-coke output capacity of below 75,000 mt/year may not meet sector rules, a market observer said in a webinar recently. He said furnaces may see potential shutdown later, which could impact magnesium ingot supply in the near run.

Trade

China's magnesium trade in different segments rose sharply in November from October levels, as prices cooled off relatively and industrial power restrictions eased. Prices also eased after record-highs seen in September as magnesium producers in the Fugu County of Yulin gradually resumed production.

China exported 36,159 mt of magnesium ingot in November, up 92% on the year, and 48.6% higher from October levels, China's latest customs data showed. In January-November, China's total exports of magnesium ingots rose 37.6% on the year.

In November, magnesium alloy exports reached 8,762 mt, down 18.9% on the year, but were up 56% from October, with January-November shipments edging up 0.4% on the year, according to customs data.

November magnesium powder exports were 6,417 mt, down 16% on the year, but up 6% from October. In the first 11 months of 2021, China shipped 8.4% more magnesium powder than the last year, according to customs data.

China is a key global supplier of magnesium, with markets like the EU sourcing more than 90% of magnesium requirements from the country.