Chinese magnesium shipments seen arriving in Nov, to ease global stock woes: sources

Chinese magnesium shipments heading overseas are expected to arrive in November, a development that is likely to ease inventory concerns of downstream sectors globally, industry sources said Nov. 10.

Since mid-October, buyers abroad were eager to replenish their magnesium supply and have bumped up their purchases, Dong Chunming, general manager of Sunlight Metal Consulting, told China Nonferrous Metals Industry Association in a report.

As a result, shipments from China are set to reach overseas clients in November, he said.

With the flow of shipments in November, concerns of downstream sector and market players are expected to ease, Dong said.

Supply concerns will be mitigated on the back of gradual recovery of magnesium sector's run rate in China's Yulin city in the Shaanxi province, Dong said. New magnesium projects coming online would also help ease supply situation overseas, he added.

Dong's statement comes at a time when market talks are pointing to overseas downstream sector running out of magnesium inventories by the end of November.

Markets like the EU heavily rely on China for magnesium supply, sourcing 95% of its requirement from China, according to European Automobile Manufacturers Association.

At one point, a group of European metals industry associations late-October called for securing magnesium supplies following a critical shortage in China's magnesium supply. The association flagged that its industry could run out of magnesium stocks by the end of November.

China in September started rationing industrial power consumption, curbing smelters' output capacity, which led to a sharp dip in the growth of magnesium output in Yulin.

Yulin accounts for almost all of Shaanxi's magnesium output, while the province contributes to about 60% of output in China.

Exports

Meanwhile, though China's customs data showed its Q3 magnesium exports fell 11% from Q2 to 102,600 mt, Dong said China's exports of magnesium products over January-September grew 19% on the year to 334,900 mt.

Exports were roughly back to the levels seen in the pre-pandemic period, to 339,500 mt in the January-September 2019 period.

China exported 11,186 mt magnesium products to EU in September, down 29% from August, while September exports to North America fell 26% from August to 4,154 mt, customs data showed Nov. 10. Meanwhile, Chinese magnesium exports to Japan fell 47% on the month to 1,982 mt in September, while exports to South Korea rose 17% on the month to 1,955 mt, the data showed.

Domestic situation

However, Dong noted that China's magnesium sector production has remained unstable, with industry awaiting easing of squeezed feedstock issues.

According to CNIA, China's requirements of the magnesium sector adopting eco-friendly technology, and rising feedstock costs have hiked sector production costs, resulting in soaring prices lately.

As of Nov. 9, Shaanxi's Yulin 99.9% magnesium ingot price was at Yuan 30,500/mt ($4,770/mt), up from Yuan 29,200/mt a week ago, data from Shaanxi Magnesium Industry Group showed.

However, November prices were still much lower than the record-high of Yuan 71,000/mt in September, CNIA data showed.

Since September, the twin measures to save energy and control emissions in Shaanxi's Yulin led to cutbacks or suspension of magnesium production, causing volatility in prices, sources said.

High prices weighed on exports, raising concerns among the markets about magnesium supply for the downstream steel, aluminum and car sectors, according to Dong.

However, he noted since mid-October, China's magnesium output and supply has started trending upwards, with exports also resuming, which has eased the price situation a bit.

Though Yulin's third quarter magnesium output fell 27% from Q2 to 113,700 mt, Yulin's January-September magnesium output still grew 3% on the year to 416,800 mt, data from China's National Statistics Bureau data showed.