[Ferro-Alloys.com] The Chinese magnesium market is widely expected to come under short-term downward pressure from ample supplies.
Magnesium metal output in Shaanxi province, the country's largest production hub for the light metal, rose by 5.13pc from a year earlier to 258,700t during January-June, data from the China nonferrous metals industry association show.
Shaanxi's production recovered in April when the country's Covid-19 pandemic abated, as producers increased output in anticipation of higher demand after lockdowns were eased. The province's output accounted for 65.3pc of the country's total production of 396,500t in this year's first half.
The rise in domestic output pushed down average prices for 99.9pc grade metal to 13,678 yuan/t ($1,965/t) between January-July, down by 17.9pc from Yn16,668/t a year earlier and the lowest level since June 2016.
Ample supplies are expected to weigh on the spot market in August because of lower demand from the export market and the downstream automotive industry.
Exports of magnesium products fell in response to reduced consumption from the aluminium, steel-producing and manufacturing industries outside of China following the escalating pandemic, with metal exports down by 6.7pc from a year earlier to 114,402t for January-June. Alloy shipments fell by 8.51pc from a year earlier to 50,671t, while deliveries of powder dropped by 22.79pc to 35,344t, according to customs data.
Export firms in China have reported a fall in orders and buying enquiries since April as seaborne buyers have reduced purchases and operated from inventories.
China's main auto manufacturers, such as GAC, Great Wall Motor and Changan Automobile, have lowered their sales guidances for 2020 because of the impact of Covid-19 despite consecutive growth from April to June.
China's automotive sales in June increased by 4.8pc from May and by 11.6pc from a year earlier to 2.3mn, the highest monthly level since 2018, data from the China's automotive manufacturers association show. But sales between January-June fell to 10.26mn units, down by 16.9pc from a year earlier, as a result of the impact of Covid-19.
The slowdown in the auto industry is expected to weigh on the consumption of auto parts and their feedstocks, including aluminium, magnesium and silicon.
Magnesium prices are expected to fall by only Yn50-100/t at most in the short term, given scheduled equipment maintenance at many smelters in August and thin profit margins. Production costs are estimated to be nearly Yn13,000/t at most refineries now.
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