EU magnesium traders weigh up Chinese price hikes

European magnesium traders are taking stock of fresh price hikes in China, arising from production cuts and potential semi-coke restrictions, but the potential for Rotterdam prices to follow suit might be curbed by weak underlying demand.

Magnesium prices jumped to 21,000-21,300 yuan/t ($3,054.15-3,097.78/t) ex-works China today, up by Yn700/t from 4 April, with export prices also rising to $3,180-3,230/t, on a combination of supply-side restrictions. Some producers in the main hub of Shaanxi province and in Wenxi County, Shanxi, have reduced production rates since mid-March because of high energy costs and profit losses, in turn raising their magnesium offers to the spot market.

But one trader compared the supply cuts with those implemented by the manganese alliance, saying that "it's just arresting the fall, and it will be the same for magnesium".

Certain producers are now refusing to quote offers to consumers and traders in China, prompting some Chinese traders to "hoard" units, one market participant said, resulting in a superficial restriction of availability despite reportedly high stocks in China.

Adding to this is the potential for further environmental restrictions on the semi-coke industry from mid-April, above the requirements already slated for 2023. No official announcement had been made by Chinese authorities in the Shaanxi province at the time of writing.

Many market participants question whether the latest price hikes will stick despite bullishness among some Chinese suppliers — in both China and Europe. Relatively low automotive production rates are filtering upstream, weighing on demand for secondary aluminium and magnesium castings, and therefore reducing requirements for magnesium metal.

Argus assessed European prices flat at $3,100-3,300/t du Rotterdam today despite near-parity between prices for fresh shipments from China and material already available in Europe for prompt delivery.

The cuts may prevent prices falling below $3,000/t fob as they briefly did in mid-late March, but unless combined with severe shipping restrictions — as has been the case previously — prices are not likely to rise significantly in the near term, a European trader said.

By Samuel Wood