SunSirs: The Supply, Demand, and Cost Logic Behind the Tiered Rise in Magnesium Prices in March

Price trend

According to monitoring data from SunSirs' Commodity Market Analysis System, the magnesium ingot market in the Shaanxi region has experienced a stair-step upward trend. As of March 2, the average market price stood at 17,500 RMB/ton—up from 16,750 RMB/ton at the beginning of the month—marking an increase of 4.48%.

Market Analysis in March

In terms of supply and demand

On the supply side, operating rates among magnesium smelters nationwide remained stable; however, spot inventories continued to deplete. From mid-month onward, major producers had prioritized the fulfillment of long-term contracts; furthermore, as expectations for maintenance shutdowns intensified in the latter half of the month, a sentiment of holding back stock to support prices became pronounced, resulting in a scarcity of readily tradable supply in the market.

On the demand side, as manufacturing operations resumed, traditional essential demand was gradually being unleashed. This trend was compounded by a low magnesium-to-aluminum price ratio, which had expanded substitution demand—specifically the "magnesium-replacing-aluminum" trend. Furthermore, the export market was showing structural improvements, and a concentrated surge in restocking demand during the latter half of the month had driven magnesium prices to accelerate their upward climb.

Raw Materials

Raw material costs constituted a rigid floor for magnesium prices, with key inputs—such as 75% ferrosilicon and semi-coke—trending upward throughout the month. In March, ferrosilicon prices rose from 5,800–5,900 RMB/ton to 6,000–6,100 RMB/ton, while semi-coke prices climbed by over 5%; collectively, these two factors drove up the production cost per ton of magnesium by 700–850 RMB, significantly squeezing industry profit margins and effectively eliminating any downside potential for magnesium prices. Meanwhile, stable dolomite prices and a slight upward adjustment in industrial electricity rates further reinforced this cost-based support.

Market outlook

The upward trajectory of magnesium prices in March was the result of the convergence of multiple factors: technical indicators confirmed a bullish trend; raw material costs established a solid price floor; and the tight balance between supply and demand continued to intensify. From a trend perspective, medium-to-long-term moving averages are consistently trending upward, providing extremely strong support levels; consequently, the probability of a sustained downward trend is negligible, and the market is expected to remain dominated by bullish sentiment. Technically, there is an inherent need for a retracement to digest overbought positions; therefore, the likelihood of a unilateral, sustained, and substantial price surge in early April remains low. Market participants should simultaneously monitor the fundamental supply-and-demand dynamics of the magnesium market, operating rates across upstream and downstream sectors, raw material prices, and changes in macroeconomic policies, as shifts in these fundamentals will directly influence the sustainability and upside potential of this rally.

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