EU Mg prices follow China down on weak demand

Europe's magnesium market is retreating from recent highs as market participants on the continent take stock of the latest price volatility and hold back from purchasing fresh units expecting further losses in the near term.

Argus assessed prices for min 99.9pc magnesium ingots at $3,650-3,800/t du Rotterdam today, down from $3,850-4,050/t on 18 May. Market participants broadly expect prices to continue falling in the coming weeks because there is insufficient demand to support current levels.

"Buyers have resisted paying the higher numbers so far and therefore with large stocks in China, prices have softened," one trader said. Others have echoed this sentiment, but often caveated with the understanding that prices could jump very suddenly with little fundamental underpinning.

The market has spiked twice in the past seven weeks because of speculation concerning phase-outs on semi-coke furnaces. Prices initially surged to $3,900-4,400/t on 13 April, up by 16pc against the previous assessment, and by 30pc from a week previously. Thereafter, prices fell in quick succession to $3,300-3,600/t du Rotterdam by 25 April. This turn of events repeated earlier this month, with prices rising to $3,900-4,250/t on 11 May and have since declined by 9pc.

One trader suggested that Chinese producers are trying to maintain prices above 24,000 yuan/t ($3,400/t at current exchange rates), below which they are turning a loss. Certainly, it was at just below this level that prices rebounded in late April to early May. Prices in China were assessed today at Yn24,000-24,500/t ex-works China, but market participants still expect further losses before any stabilisation.

The phase-out of in-house semi-coke furnaces with capacities below 75,000 t/yr is now under way with a slated deadline of the end of June. Some magnesium producers have confirmed shutdowns to Argus, but market participants have said that specific details on the affected magnesium volumes are unclear.

"It does seem that the production curtailments will be significant but with poor demand it might just be a chance for the stocks to clear rather than causing any big shortage," one trader said.

China's magnesium output fell in January-March as producers lowered production vying to support the market which was trading at or below production costs. Output fell to 203,000t in January-March, 14.3pc lower than a year earlier. Exports were similarly down 22pc year on year, with first-quarter shipments totalling 53,740t — 19,239t in January, 14,365t in February and 20,136t in March. Exports in April stood at 13,104t, a 45pc decrease from a year earlier, underscoring the lack of demand in Europe in particular and other international markets.

By Samuel Wood