Uncertain supply supports US Mg prices

Concerns over global magnesium supply alongside uncertainty about US production have added pressure to an already tight market domestic market.

US Magnesium, the largest primary magnesium producer in the US, declared force majeure in the third quarter of 2021 because of equipment failure. The producer did not provide further details or a timeline, leading to uncertainty among market participants, according to consumers surveyed by Argus.

US Magnesium did not respond to a request for comment.

This force majeure came at a challenging time in the global magnesium market as production cuts in China, the world's largest producer, tightened global supply. Global supply issues started in September 2021, when government agencies in China halted magnesium production in Fugu and Shenmu counties to achieve energy control targets.

Since the initial production cuts, Argus' Chinese 99.9pc magnesium prices have been volatile based on fluctuating demand and inventory levels. Prices in China initially rose to an all-time high of $10,000-10,600/metric tonne on 23 September before declining to $4,750-4,900/t on 8 November and returning to $6,850-7,020/t in the 24 January 2022 assessment.

Market participants in China anticipate that prices could fluctuate in 2022 based on the new supply-demand dynamics.

Argus' 99.9pc magnesium prices in the US similarly rose to $13,288-15,432/t from $5,181-5,512/t between from 21 September to 5 October. But unlike Chinese prices, they have remained at these high levels. US market participants surveyed by Argus attributed part of the lack of volatility in US prices to the anti-dumping tariff on Chinese magnesium and increased uncertainty about domestic supply since the force majeure.

The US has levied anti-dumping tariffs on Chinese primary magnesium. But the US does import magnesium scrap from China and from other countries that rely on China for their primary supply. US suppliers can also be exposed to Chinese magnesium if they use it to supply customers in Mexico or Canada. US market participants expressed concerns that potentially similar environmental cuts in China later in the year could impact global supply further.

Higher magnesium prices have already rippled down the supply chain as alloy makers passed on the increased cost to customers. Matalco, a producer of aluminum extrusion billet, added a hardener surcharge to its orders starting this month to offset the increased cost of magnesium and silicon.

Market participants surveyed by Argus anticipated that magnesium prices in the US could fall should they get better clarity of production levels in the US and abroad but that they would remain at elevated levels compared with before the production cuts.

By Andrew Saucer