Weaker demand pressures China magnesium prices

Chinese magnesium prices extended declines this week as buyers reduced purchases in anticipation of weaker prices from lower feedstock costs.

The range for 99.9pc grade metal was assessed at 32,000-33,000 yuan/t ($5,000-5,156/t) ex-works today, down from Yn36,000-37,000/t on 29 October and Yn39,000-40,000/t on 28 October.

Prices surged to a multi-year high of Yn65,000-70,000/t on 23 September after all smelters in the major production hub of Fugu county in northwest Shaanxi province were ordered to suspend operations in the second half of September to comply with the government's energy consumption control policies, while producers in neighbouring Shenmu county also halved their output because of the curbs.

Many producers from the downstream magnesium alloy, magnesium powder and titanium industries have reduced their purchases or halted production since September after metal prices exceeded Yn30,000/t as high feedstock prices costs resulted in profit losses Producers could not include higher feedstock costs in their products.

China's titanium sponge output fell to 8,650t in October from 9,300t in September and 9,780t a year earlier, according to Argus' data.

Prices started to decline after producers in Fugu and Shenmu restarted production in early October. Offers fell to Yn33,000/t today, with a few deals at Yn32,000/t. Most buyers are awaiting further declines in prices and are not eager to respond to offers from producers.

Prices for coking coal feedstock shrank to Yn1,200/t delivered today from Yn2,300-2,500/t in the middle of October after supplies increased, according to market participants. Prices for another key feedstock 75pc grade ferro-silicon softened to Yn15,500-16,000/t on 28 October from Yn20,000-20,500/t on 11 October following weaker market sentiment.

Demand from seaborne markets has remained weak with buyers monitoring the downtrend in China. Export prices dropped to $5,100-5,300/t fob today, down from $10,000-10,600/t fob on 23 September.

"We suspended offering prices in September and resumed in October, but have received little buying interest from overseas buyers," said a Shanxi-based export firm, expecting that the downtrend in China could make buyers more reluctant to sign contracts.

China's shipments in September fell to 16,921t, down by 24.5pc from August as overseas buyers reduced purchases in view of price volatility China.

There remains upside potential later this month as the government may begin environmental inspections, which could stop production across magnesium producers in the country's second largest metal production hub of Shanxi province, ahead of the Beijing 2022 Winter Olympics in February, market participants said.

China's Mg prices Jan-Oct Yn/t