SunSirs: Cost Support Continued to Strengthen, and Magnesium Prices Break Through 17,000 RMB/Ton (March 23–27)

Price trend

According to monitoring by the SunSirs Commodity Market Analysis System, the magnesium ingot market in the Shaanxi region rose last week (March 23–27). The average market price stood at 16,950 RMB/ton at the beginning of the week and reached 17,050 RMB/ton by the end of the week, marking an increase of 0.59%.

Market analysis

The domestic magnesium ingot market followed a trajectory of volatile upward movement followed by stabilization at elevated levels; overall market conditions remained firm, with the price center  steadily shifting upward and no significant corrections observed. The primary drivers behind this latest round of magnesium price fluctuations were the interplay of multiple factors: rising raw material costs, supply-side production controls aimed at bolstering prices, and steady, rigid demand on the consumption side.

Supply Side

Last week, the domestic supply of magnesium ingots remained stable; operating rates in major production regions held steady, with no instances of large-scale resumptions or reductions in output. Regarding inventory, levels remained at a historical low for this time of year; both factory-held and market-wide stocks were simultaneously depressed, resulting in a scarcity of readily tradable spot supplies. Driven by cost pressures, manufacturers exhibited a strong inclination to hold firm on pricing and were reluctant to sell. Leading enterprises explicitly refused to accept low-priced orders, prioritizing the fulfillment of previously established long-term contracts. Consequently, the volume of material released into the spot market was limited, and low-priced supplies continued to dry up; this tightening on the supply side provided robust support for prices.

Demand Side:

Last week, demand for magnesium ingots remained moderate; overall purchasing activity was driven primarily by immediate, essential needs, with no signs of large-scale inventory restocking or concentrated buying sprees. This was the primary reason why the upward momentum in magnesium prices slowed, leading to a stalemate at elevated levels. Magnesium ingot export orders remained stable, showing no significant increase for the time being; consequently, demand from overseas markets provided only limited impetus to the domestic market. Overall, while the demand side did not act as a drag on the market, neither did it deliver any standout performance; the forces of supply and demand have converged toward equilibrium, resulting in a high-level standoff.

Cost Side:

As the primary reducing agent in magnesium smelting, ferrosilicon accounts for over 30% of production costs; last week, prices for #72 ferrosilicon trended upward. The current round of ferrosilicon price hikes is primarily driven by disruptions to overseas ore supplies—specifically, a typhoon in Australia that halted manganese ore shipments—which has bolstered the entire ferroalloy sector. This factor, combined with low operating rates among domestic ferrosilicon producers and tight spot market supplies, has provided strong cost support for magnesium prices. Prices for semi-coke and thermal coal have risen in tandem, further driving up smelting costs. Meanwhile, influenced by geopolitical tensions in the Middle East, rising international oil prices have stimulated increased demand for coal as a substitute fuel; consequently, domestic prices for semi-coke and thermal coal have remained stable while trending stronger.

Market outlook

Based on an assessment of the two core factors—comprehensive costs and supply-demand dynamics—domestic magnesium prices are unlikely to experience significant fluctuations in the short term; they are highly likely to maintain a trend of high-level volatility. Moving forward, close attention should be paid to the price trends of raw materials such as ferrosilicon and coal; should raw material prices continue to strengthen, magnesium prices are poised to break out of their current trading range.

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