Producers: Magnesium ingots market to stabilize

9 Sep 08 – Producers believe that the magnesium ingot market is leveling off after the price falls from RMB36,000-36,500/t (USD5,263-5,336/t) ex works early June to current RMB24,000-24,500/t (USD3,509-3,582/t) ex works which is close to the production cost. However, they are not confident in saying that more activity will be seen in the market in the rest of this month as most consumers still have little interest in purchasing.
"I don't think the magnesium ingot price will drop further; otherwise, more producers who will run at a loss may have to shut down," an official from a Shanxi-based smelter said to Asian Metal.
The source currently holds the quotation higher than RMB24,500/t (USD3,582/t) ex works but no deal has been concluded since early this month. The source acknowledged that more deals were reportedly concluded at RMB24,100-24,300/t (USD3,523-3,553/t) ex works during the past week and also heard of the low price of RMB23,800-23,900/t (USD3,480-3,494/t) ex works that appeared in Fugu, Shaanxi.
The smelter is running with an output of around 700-800tpm and the expansion project is underway. Its total capacity will reach 15,000tpy after the new furnaces are put into production in October. Considering that more new smelters or expansion projects will put into production soon, the source predicts that the magnesium market will keep low in the rest of this year with prices fluctuating around the production cost.
A major Ningxia-based producer with a capacity of 1,500tpm reported a concluded deal at RMB24,200/t (USD3,538/t) ex works. The source revealed that the company is focusing on domestic sales, and no export business has been closed over the past several weeks as most foreign buyers shunned the market.
The source also believes that there will be little room for magnesium ingot price to go down further in view of the increased production cost. "The current price is approaching the bottom line, so smelters will try their best to prevent the price from going lower," said the source.
With a stock of 200-300t, the source also takes a negative expectation on the future market, believing that situation of oversupply is likely to keep up to the fourth quarter.