EU magnesium prices rise on tight Chinese supply

European magnesium prices have risen sharply in the past two weeks as high metallurgical coke costs continue to squeeze Chinese producers, causing them to hike export offers and limit shipments to overseas buyers, but many European consumers are holding back in expectation of prices correcting downwards over the summer.

Prices rose to $3,400-3,500/t in Rotterdam yesterday, from $3,100-3,230/t on 17 June and $2,950-3,080/t two weeks ago, as European traders struggle to source significant volumes from China to replenish their stocks.

With warehouses running low, traders have little prompt material on offer and price hikes have followed. That said, most consumers are reluctant to buy, hoping that prices will fall in July-August as conditions ease. One trader concluded several deals for delivery at the end July and in August at $2,950-3,080/t ddp, underscoring expectations of price cuts in the coming months.

"It seems export buying evaporates at levels above $3,000/t fob," said one European trader who regularly imports magnesium. "It's at this level it all fell apart last time as everyone stops buying."

Several offers have been put forward this week at above $3,000/t fob but with no deals concluded. One trader declined two offers for 50t each at $3,080/t fob. Two other traders received offers at $3,420/t cif Rotterdam and $3,500/t cif Rotterdam, but said they preferred to wait for price reductions.

Temporary coke shortage adds to shipping issues

China's acute metallurgical coke shortage is expected to be temporary, but for now it is adding another inflationary cost factor for an industry that has already been struggling with shipping constraints and high freight rates for several months.

Prices for 62pc CSR met coke were assessed at $449.15/t north China on 17 June, remaining at historically high levels since surpassing $400/t on 29 December 2020 amid tight supply and strong global demand. Some new Chinese met coke production capacity is scheduled to come on line in June-July, but prices are likely to remain firm for now given that domestic coking coal supply is tight amid mine closures linked to the 100th anniversary celebrations of the Chinese Communist Party.

Market participants expect feedstock shortages to eventually abate, but shipping remains a significant cost when moving magnesium from China to Europe. "Shipping lines are crucifying people right now," one trader said, adding that lots in southern China are more likely to be "snagged" at ports because of coronavirus restrictions. Northern ports such as Tianjin are still able to ship quickly, according to market participants.

Despite that, shipping adds $250-300/t to magnesium imported to Europe and there are certain to be delays as ships stop at various ports on the way to pick up more valuable cargo, making the most of high prices.

By Thomas Kavanagh