Magnesium prices are pushing higher, but the latest rally is driven less by a resurgence in demand than by a sharp increase in the cost of keeping Chinese smelters running.
According to the Shanghai Metals Market (SMM), prices for 99.9% magnesium ingot in China reached roughly between ¥15,800 ($3,270) and ¥15,950 a tonne between July and August, with neither upward nor downward momentum.
That changed in late August as coal prices began accelerating, pushing up the cost of producing primary magnesium and prompting smelters to raise offers.
On 2 September, magnesium prices reached an average price of ¥161,000 per tonne, up 0.31% from the previous trading day, or 1.86% from 28 August.
The latest move has been closely linked to China’s coal market, where supply has tightened amid safety supervision and a pullback in truck clearances at the Ganqumaodu port.
SMM data shows the average transaction price for Hongliulin lump coal climbed from ¥732 a tonne in July to ¥1,184 a tonne on 3 September.
Supply, demand, and outlook
On the supply side, SMM reports smelters showed strong willingness to hold prices firm due to rising costs, with offers continuing to push higher. However, high-priced sales met resistance and some levels saw no transactions.
Meanwhile on the demand side, traders sold at lower levels, downstream purchasing attitudes were cautious, wait-and-see sentiment was thick in the market, and upward price resistance became evident.
Coal mine production resumptions remain slow, safety supervision pressures are staying high, and effective coking coal supply is insufficient.
SMM says most coal mines hold coking coal inventories at low levels, with strong sentiment to hold prices firm and hold back from selling. Meanwhile, online auction market interests remain high and premium transactions are still considered the mainstream, so the coking coal market is expected to hold up well in the short-term.
For the magnesium market outlook, the short-term coal supply gap is difficult to close, and expectations for the fourth round of coke prices to take effect are heating up, so cost-side support for magnesium prices from raw materials remains.
Both domestic and overseas demand currently lack strong drivers, and magnesium prices are more likely to move sideways in the short-term.
SMM recommends paying close attention to price trends for raw materials such as coal, ferrosilicon, and semi coke.
Write to Aaliyah Rogan at Mining.com.au
Images: iStock
