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Latest news in China's magnesium market

时间:2021-10-15



Latest news in China's magnesium market (Oct.11-15)

From October 1, producers in Fugu County, Yulin City, Shaanxi Province, the main origin of China's primary magnesium, has ended their 10 day shutdown, restoring 40% of their capacity, and the supply of primary magnesium ramps up. But prices, including both ferrosilicon and coal, continue to rise. Furthermore, with both demand and procurement slowing down, magnesium market has entered a new balance. The producer price dated Oc.11-15 is 2000 yuan /t lower than that last week. Now, it, still consolidated in the high range, fluctuates between 47000-49000 yuan /t.
 
As for demand side, some domestic magnesium ingot users, in magnesium alloy and sponge titanium segments, have stopped purchasing. Meanwhile, power shortage in some provinces has further intensified, and power inaccessibility has occurred to some degrees in Guangdong, Henan, Jiangsu, Zhejiang, Liaoning, and Inner Mongolia. The operating rate of magnesium users, including aluminum and die casting plants, runs lower, and the procurement of raw materials, including magnesium, has also paced down. Domestic magnesium exporters and foreign importers also worry about market changes and become cautious in purchasing. Now only domestic and foreign aluminum plants purchase following their demand. Some downstream customers for magnesium die casting, including automobile steering wheel and sacrificial anode users, have to accept the price spike of magnesium products and continue to purchase. Worried about the continuous shortage of magnesium supply for two months ahead this year and H1 (2022), some foreign customers have an obvious intention to ramp up procurement for stock, which leads to higher market inquiry and producers' intention to stabilize prices. Therefore, a new balance comes on in magnesium market, marching into wait-and-see period. Producer price dated Oct 11-15 ended at 2000 yuan /t, lower than last -week, and currently ranges between 47000-49000 yuan /t.

Important news in this week

●on October 8, Premier Li Keqiang chaired an executive meeting of the State Council to further deploy the supply of electricity and coal this winter and next spring, so as to ensure the basic life of the people and the stable operation of the economy. The meeting pointed out that since 2021, energy prices in the international market have risen sharply, and the supply and demand of domestic electricity and coal have remained tight. Various factors have led to power cuts in some places recently, which has had an impact on the normal economic operation and residents' lives. In view of the still great pressure on the supply and demand of electricity and coal this winter and next spring, the meeting stressed the need to ensure energy security and stability of industrial chain supply chain, and the supply of electricity and coal. On ensuring safe production, coal mines with potential are promoted to pace up production possible, accelerate the production of approved and basically completed open-pit coal mines, and speed up coal mines, having stopped production for rectification, to restructure in accordance with laws and regulations and resume production as soon as possible. The government should support coal power enterprises to increase power supply, and at the same time, resolutely curb the blind development of high pollution and high energy consumption projects.

●on October 9, Premier Li Keqiang chaired a meeting of the National Energy Commission, emphasizing the guarantee of stable energy supply and security, and promoting the green and low-carbon transformation of energy structure. The government should resolutely correct inappropriate administrative measures in some places, stop "one-size-fits-all" power rationing sites or intermittent carbon reduction in some places, and ensure stable industrial supply chain and steady economic development. The government will resolutely prevent both accidents in one enterprise and shutdown and rectification of enterprises in the whole region

●On October 12, National Development and Reform Commission (NDRC) issued a policy on further deepening the market-oriented reform of on-grid electricity price for coal-fired power generation. In principle, all coal-fired power will enter power market, and the on-grid price will be formed within the range of "benchmark price plus fluctuation" through market transaction. The government will expand the floating range of transaction prices in the coal-fired power generation market, which, in principle, will not exceed 20%. The market transaction price of high energy consuming enterprises will not be subject to the floating limit of 20%. This will lead to the electricity prices, in ferrosilicon, magnesium and aluminum smelting producers, continue to ramp up.

Market outlook by Sunlight metal: Central government has asked to increase energy supply, however, from October 20, northern China will enter the heating season one after another. Energy supply is still tight nationally, and energy prices will keep higher further. In winter, with growing heavy pollution weather, government will be take stricter measures to prevent and control air pollution in northern China. According to the plan by the Ministry of Ecology and Environment PRC, winter in 2021 will see ever-growing scope of peak shifting, production restriction and shutdown of industrial enterprises in northern China, including Beijing, Tianjin and most surrounding areas as Shanxi, Hebei, Shandong and Henan provinces, involving 65 cities. Several magnesium smelters operate in Yuncheng, Xinzhou and Luliang, Shanxi province, and Xinzhou is the main producing area of dolomite. Meanwhile, policies of total energy consumption control will be effective in Inner Mongolia, Qinghai, Ningxia, and Shaanxi, and, as a result, electricity price will gradually rise. As they will not be conducive to the supply of raw materials for magnesium production, and the price of raw materials will continue to be high. Therefore, there will still be great uncertainty in the production of primary magnesium, and these factors will also support the price of magnesium. On the other hand, high price of magnesium has restrained some consumption, and this negative impact is still expanding. The production restriction of aluminum and steel segments will also further reduce the demand for magnesium, which also hold back higher magnesium price. It is expected that China's magnesium price will remain relatively stable in the high range for a period of time.

The annual conference of China Magnesium Association, dated Oct 18-20, will be kicked off in Yulin. According to schedule, leaders from Yulin and Fugu government will deliver speeches or reports at the conference. Their views and statements, at this special juncture, on the operation of regional magnesium industry and development ahead, will attract the attention of the industry. The measures by government of main producing areas to promote the high-quality development of magnesium industry under new double control pattern will also trigger coming structural adjustment and dominate market trend of the industry. We believe that this round of sudden change in magnesium market and sharp price spike will not only bring great shock to the industrial chain, but also carry forward lots of reflection, forcing the industry and market to change for the better.

Dong Chunming
Sunlight Metal Consulting (Beijing) Co., Ltd.
www.chinamagnesium.net
+86-13901145114
chunmingdong@sina.com



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