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23. August 2007

Chinese magnesium ingot prices gain on bullish domestic market

Chinese pure magnesium ingot spot prices firmed further this week to $2,650-2,680/mt FOB China, up compared with $2,600-2,650/mt FOB China quoted in early August, local industry sources told Platts on Tuesday, adding that some spot material was settled at a high of $2,700/mt FOB Tianjin, China.
Traders said the domestic market was bullish, led by strong demand in the Chinese market. Local producers, therefore, also raised their offer prices to overseas buyers.


An official from Beijing Antaike, the state-run nonferrous information provider, said some offer prices were quoted at $2,700/mt FOB China but "very limited transactions were reported." He added: "Higher prices are mainly triggered by stronger domestic demand in China. Downstream magnesium producers are ramping up their output following the summer slowdown and they are looking for more magnesium ingot as feed supply." 
An official from major producer Shanxi Wenxi Yinguang Magnesium, which exports about 5,000 mt/month of magnesium ingot, said the company recently sold spot material at $2,680/mt FOB China. "Recent higher prices are simply a normal price adjustment," the official said, adding that the company was now offering domestic material at around Yuan 20,000 ($2,633)/mt ex-plant. Other local industry sources said domestic prices were quoted in a range of Yuan 19,200-19,800/mt ex-plant. 


A source close to Chinese producers added that export prices for magnesium ingot were quoted at $25/mt higher compared with last week's price level. "Most Chinese ingot producers have very little stocks left as most of them had reduced their output earlier during the summer period." He added that production plants in China preferred to implement their technical upgrades in summer. "The chance of having accidents caused by smelting is much higher in summer due to the hot temperature while production is generally safer in winter so producers would rather raise their output when the temperature cools down." 

He added that higher freight costs in China also impacted prices. "Both rail and truck transportation costs are higher for loading material from Ningxia to Shanxi provinces." Many magnesium plants are located in the two Chinese regions. The source added that the Chinese magnesium market remained in consolidation in line with the China's macroeconomics policy. "The Chinese government cuts down on giving out loans to those smaller scale magnesium producers as the country targets to curb the energy-guzzling industries.
Smaller producers are finding it difficult to expand and some of them have given up on joint venture opportunities due to a lack of funds," he said.

Meanwhile, local industry sources said magnesium alloys prices were quoted at $300-400/mt higher than ingot prices. "Export trade on alloys has been weak as that material from China is normally poorer in grade which is not favored by overseas consumers," the Antaike source said. "Production technology with most Chinese alloy producers is still backward compared with overseas producers. Consumers would rather purchase material from other western origins."

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