Volatile magnesium market could promote larger inventories, scrap retention: panel

Ongoing volatility in the global magnesium market, characterized by uncertain supply and high prices in 2021, could encourage US consumers and market participants to build up their inventories and increase scrap recovery initiatives, industry stakeholders said Feb. 1.

"I think there's going to be an increase in inventory by magnesium consumers as a hedge against future market volatility because as we know, or may have learned, there is simply no replacement for magnesium when you need it," Magretech Sales Director Jonathan Chien said during a panel discussion at the S&P Global Platts Aluminum Symposium.

Higher magnesium prices should also make it more cost effective to sort out and recover magnesium from scrap, such as zorba automotive shred, he added during the webcast discussion.

Magretech is a magnesium recycler and secondary alloy producer based in Ohio.

The Platts weekly assessment for min-99.8% pure magnesium settled at $6.875/lb DDP US on Jan. 27 for either producer-direct or trader/broker sales. The assessment was down from a 2021 peak of $7.625/lb in October but more than triple the 2021 low point of $2.025/lb in April.

Chien said the new price ranges will also increase the market's focus on China, where most global production is concentrated.

"The long-term direction of the global market is ultimately going to be decided [in China] and will be heavily affected by changes to their environmental energy and regulatory policies," he said, adding that volatility may also lead to the creation of a magnesium futures market in China to promote stability.

Twin City Die Casting CEO Todd Olson said volatility in the magnesium market is expected to persist as production in China continues to be pressured by lower energy consumption and emissions targets. These conditions have prompted die casters retain their scrap, instead of shipping it to others in the market, he added.

"In Europe, by the end of November, die casters were more reluctant to give up their scrap, but in the past, it was common for them to sell their scrap because it had a little bit of a premium since it could be used in the US market," he said.

"But when magnesium was in short supply, die casters didn't want to let anything physically go from their possession because they were concerned about potentially not getting it restocked from China. I think that really had an effect on tightening some of the scrap coming to the US."

US magnesium scrap imports totaled 1,495 mt in November 2021, down from 1,746 mt in November 2020, according to US Census data.

Twin City is a Minnesota-based producer of aluminum and magnesium die casts.