Tighter supplies to lift China magnesium prices

Chinese magnesium metal prices are expected to rise further in the short term in response to higher feedstock prices and a fall in spot supplies.

The market yesterday rose for the first time since the end of May, with the range for 99.9pc grade metal increasing by Yn50/t ($7.30/t) to 15,350-15,750 yuan/t, rising further today to Yn15,500-15,900/t.

There is further upside potential in the short term as suppliers of ferro-silicon feedstock are expected to raise their prices further and cut operating rates following equipment maintenance, despite weak consumer demand.

Ferro-silicon is key feedstock in magnesium metal production, with 1-1.1t typically used in producing one tonne of the metal.

Prices for 75pc grade ferro-silicon increased to Yn5,900-6,000/t on 2 July from Yn5,650-5,800/t on 13 June as several producers increased offer prices on limited stocks after months of maintenance.

Domestic largest ferro-silicon producer Erdos has lifted its benchmark price for 75pc grade alloy to Yn6,700/t. Fellow ferro-silicon producers could lift their offer prices again in the coming weeks to push steel producers to increase their tender prices for August delivery.

Several magnesium metal producers have started equipment maintenance and more smelters carry out overhauls in August. The lower supplies are expected to offset weaker demand from buyers outside because of the summer period and a slow automotive sector.

China's automotive sales rose to 2.06mn units in June, up by 7.5pc from May as car dealers cut prices to clear off inventories before a set of tighter fuel standards were implemented in July. Output in June also grew by 2.5pc from a month earlier to 1.9mn units in June. Sales in July are expected to fall from the June after buyers completed purchases.

Total car sales during January-June fell to 12.32mn units, down by 12.4pc from 2018, with output down by 13.7pc to 12.13mn units in the same period in line with a slower economic growth.