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SunSirs: Can the Soaring Coal and Exaggerated Ferrosilicon Support the Downward Chinese Magnesium?
January 22 2021 08:19:35SunSirs(Linda)

List of Magnesium Market Trends

According to data from SunSirs, the average domestic market price of standard magnesium ingots on January 21 was 14,266.67 yuan/ton, which was a decrease of 7.98% from the average market price of 15,500 yuan/ton at the beginning of the month (1.1); and was 12,333.33 yuan/ton from the valley value in 2020 (9.21). Tons, an increase of 15.68%.

On January 21, 2020, domestic magnesium ingots (99.9%, no pickling, simple packaging) ex-factory cash including tax prices are weak and stable. The current mainstream quotation range is 14000-14400 yuan/ton. Details are as follows:

The external quotation range of magnesium ingots in Fugu area is 14000-14300 yuan/ton; the quotation range of magnesium ingots in Ningxia area is 14000-14300 yuan/ton; the quotation range of magnesium ingots in Wenxi area is 14300-14400 yuan/ton; magnesium in Taiyuan area The external quotation range of ingots is 14200-14400 yuan/ton.

Note: Magnesium ingots are national standard (GB/T3499-2011) primary magnesium ingots; non-pickling, no wooden pallets, and non-payment of acceptance price, the actual order negotiation is the priority.

At present, the price of magnesium ingots basically stopped falling and stabilized, and gradually entered the platform shock zone. The stalemate between supply and demand in the spot market is mainly based on the following two factors:

1. High raw material prices, strong cost support, and narrow downside of magnesium prices

(1) Coal prices continue to rise

According to data from SunSirs, coal prices have continued to rise since mid-to-beginning of November. Steam coal prices in the Hebei market have continued to rise for 9 consecutive weeks, breaking through 1,000 yuan/ton, setting a 10-year high. The rate of increase is also rare in the past 10 years. (Short-term effects of the epidemic in Hebei). Market prices in other regions have also increased significantly. According to the monitoring of the Ministry of Commerce, coal prices in December increased by 2.2% month-on-month and 2.7% year-on-year; among them, the prices of thermal coal, No. 2 anthracite coal, and coking coal increased by 2.7%, 1.5% and 0.7% respectively. From January 11 to January 17, the national coal prices rose slightly. Among them, the prices of thermal coal, No. 2 anthracite coal, and coking coal were 630 yuan, 959 yuan and 777 yuan per ton, up 1.1%, 0.3% and 777 yuan respectively. 0.3%.

It is reported that the reasons for the price increase are: first, the increase in the transfer of railways, squeezing coal and land sales traders, and supporting the price; second, the strong demand for non-electricity, affected by the epidemic in the first half of the year, the infrastructure is concentrated in the second half of the year, and the cement, metallurgy and other industries are used Coal demand has increased sharply; third is the heating period, the demand for civilian winter storage is better, and the price of lump coal continues to rise; fourth, the coal industry resolves excess production capacity, and Shaanxi Province, the main magnesium ingot producing area, will close and exit 57 coal mines in 2020. The production capacity is 16.93 million tons/year. Among them, most of the closed and exited coal mines have a production capacity of less than 300,000 tons (including 300,000 tons), and 47 have a total production capacity of 11.41 million tons/year; the largest production capacity is Huanglougou, Xunyi County, Xianyang Coal mines have a production capacity of 900,000 tons/year; Fifth, the impact of the sharp drop in Australian coal imports.

Since Shaanxi magnesium metal is mostly a recycling industry of blue carbon-ferrosilicon-metal magnesium, the production of primary magnesium and coke powder (blue carbon, clean carbon) is greatly affected by the price of raw coal, and the high production cost puts pressure on production and operation. In addition, in early December, Fugu Magnesium Association and Blue Carbon Association also discussed countermeasures for this purpose. It can be seen that the cost factor factor is gradually increasing in the process of falling magnesium prices.

(2) The spot price of ferrosilicon continued to rise, but the futures jumped and fell back

The spot ferrosilicon price has risen sharply since November. Ningxia has restricted production and the price of raw coal has skyrocketed, causing the cost of blue carbon to rise. It is reported that in 2020, the blue carbon association called for production cuts and price guarantees, superimposing recent environmental protection policies, requiring a 35% reduction in blue production. The price of carbon production will rise accordingly, and the cost of ferrosilicon will be supported strongly. In addition, the end of November ushered in the Zhongwei production restriction crisis, and the price of ferrosilicon was soaring and soaring; the ferrosilicon futures market jumped sharply and rose rapidly.

Affected by the high and weakening prices of thermal coal, coking coal and coke this week, ferrosilicon futures prices began to fall sharply. On the one hand, it is because the ferrosilicon price futures market has risen steeper than the spot market, and has fallen back slightly; on the other hand, because the foreign epidemic has not been effectively controlled, overseas demand has severely contracted, which has severely impacted my country's ferrosilicon export volume. There is a continuing downward trend. According to customs statistics, the total export volume of ferrosilicon in 2020 will be 257,200 tons, a decrease of 129,300 tons from last year. (Among them, the total export volume of ferrosilicon in December 2020 was 19,71.584 tons, of which the export volume of ferrosilicon with silicon content greater than 55% was 18034.584 tons, an increase of 2421.598 tons from November, an increase of 15.51% from the previous month; the silicon content was less than or equal to 55% The export volume of ferrosilicon was 1,677 tons, a decrease of 372 tons from November). In addition, the number of major steel strokes for consumption near the Spring Festival has decreased from the previous month. It is reported that Hebei Iron and Steel Group issued a tender for 75B ferrosilicon procurement in February 2021, with a volume of 1432 tons, a decrease of 1141 tons from January (including: Tangshan stainless steel 66 tons, Chenggang 100 tons, Wugang 500 tons, Shigang 66 tons, Tang 700 tons of steel new zone).

2. Downstream just needs to purchase, demand is flat, logistics may be restricted, accumulation risk is negative for magnesium price

In mid-November, foreign orders focused on purchasing, and the number of enquiries increased. The second round of bottoming and rebound started. After nearly two weeks of rising, the current market has gradually entered a long-short stalemate. The price of raw materials rose in early December, driving the price of magnesium to continue to rise. At present, market trading is weakening, and downstream customers have begun to operate cautiously. Some magnesium powder and magnesium alloy companies purchase small batches of magnesium powder and magnesium alloys, and only need to purchase mainly. On the one hand, because downstream deep-processing enterprises have concentrated their purchases before New Year's Day and are currently fully stocked; on the other hand, because the magnesium price in the early stage has risen significantly and the decline is less than downstream expectations, downstream customers feel that there is still room for gaming and are easy to buy. Don't buy or sell mentality.

It is reported that on January 18, Yulin City issued the "Notice on Doing a Good Job in the Prevention and Control of the Epidemic Situation of Freight Vehicles and Personnel Returning to Yulin". With the upgrading of local vehicle management and control, transportation has become more and more difficult, and logistics freight rates are also rising. Logistics may be expected to rise due to restrictions. The pressure on manufacturers' shipments will increase, and the risk of accumulation is negative for magnesium prices.

Market outlook is expected

SunSirs analysts believe that the price of raw materials has risen, and the current relatively high level of operation has greatly reduced the profit margins of mainstream magnesium companies; early downstream demand is poor, orders are few, shipments are not smooth, the risk of inventory accumulation increases, and magnesium prices are forced to be lowered to promote Volume. At present, the overall supply and demand side is in a see-saw stalemate, price fluctuations have slowed down, downstream just need to prepare warehouses, demand release is general, more bargaining transactions, high price acceptance is low, and magnesium prices are weak; while manufacturers' cost side is under heavy pressure, spot inventories The volume is still within the acceptable range, and the willingness to make price will continue to decline; the market gradually enters the stable and volatile range of the platform.

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