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China sees limited stocks in magnesium sector, demand shoots up: sources

Highlights

Prices steady as downstream sector slows down buying

Some smelters without ingot stocks

CNIA urges government to tighten feedstock monitoring

China's magnesium sector has started witnessing a surge in domestic demand amid limited stocks as most industry participants cleared their inventories in November and following a state-backed conglomerate's move to secure reserve supplies, industry sources said Nov. 30

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Domestic smelters are lining up production to meet a sudden rush in orders, commodity information services agency Zhejiang Netsun said.

As buyers steadily turn to replenish their ingot stocks, the domestic sector's production cycle for meeting demand has extended lately, Netsun said.

In recent weeks, China's downstream sector has mainly purchased with an eye on price levels, with most volumes bought when prices were lower, while thin trading was observed at higher prices, according to Netsun.

Price situation

The downstream sector slowed down buying in northwest China after prices rebounded in the week ended Nov. 27. As a result, prices are now steady after climbing to Yuan 36,000/mt ($5,648), producer Shaanxi Magnesium Industry Group said.

In the same week, some cash-strapped Chinese magnesium suppliers trimmed their offers to Yuan 33,000/mt or below to hike sales as they seek funds to run operations, according to the group.

State-backed conglomerate Shaanxi Yulin Magnesium, which consists of Shaanxi Yulin Energy Group, the Fugu county government, Shaanxi Nonferrous Metals Trading Center, and 20 other magnesium smelters in Yulin, signed magnesium ingot purchase deals with six-seven smelters, with other deals set to follow, local media reported earlier.

The deals are seen part of plans to build up Yulin's strategic reserves, sources said.

Some smelters are left without ingot stocks to meet orders amid the scant spot ingot supply and reserve purchases in Yulin, so a price dip in the near term is unlikely to happen, Shaanxi Magnesium said.

As of Nov. 29, tax-inclusive 99.9% magnesium ingot prices in both Shaanxi's Fugu and Ningxia were at Yuan 36,000-36,500/mt, while ingot of the similar specification in Shanxi's Taiyuan and Wenxi were at Yuan 36,500-37,000/mt, showed data by Shaanxi Magnesium.

A few finalized deals were slightly below the Yuan 36,000/mt level, according to Shaanxi Magnesium's data.

The China Nonferrous Metals Industry Association has recently urged government-backed agencies to tighten monitoring of the magnesium sector's feedstocks -- coal and ferrosilicon -- which could help in stabilizing magnesium prices within a reasonable range, as it said high ingot prices could heavily impact the magnesium sector.

CNIA urged industry participants to utilize capacity more as long as safety measures were followed and to avoid excessive stockpiling and speculative activities unrelated to their production for orders.

Exports rise

China exported 36,900 mt magnesium products in October, up 28.6% from September and 9.5% higher on the year, hitting a 19-month peak, customs data showed Nov. 30. Back in March 2020, China's magnesium product exports reached 38,319 mt.

In October, China exported 24,329 mt of magnesium ingot, up 44% from September and 58% on the year, with January-October exports up 31% on the year, customs data showed.

Chinese magnesium alloy exports were 5,604 mt in October, up 7.5% from September, but still down 52% on the year, with January-October exports rising 2.8% on the year.

China's key magnesium markets the Netherlands and Japan received 8,652 mt and 2,892 mt of magnesium alloy, respectively, in October, customs data showed.