SilMag to Provide Alternative Magnesium Supply for Hot Market

Magnesium smelter, SilMag of Norway starts former Norsk Hydro’s Porsgrunn plant in 2011 at annual 35,000 tonnes output through the acquisition from Hydro. SilMag launches secondary magnesium alloy production at annual 15,000 tonnes in 2009. The firm tries to expand the operation to compete with Chinese suppliers under the surging international market. Magnesium price increased to near 3 times in a year reaching US$ 6,300 per tonne. The price is expected to reach US$ 7,000 in the year when the supply squeeze from China, which represents 80% of world supply, along with surging energy cost. Magnesium buyers are uncomfortable with Chinese suppliers due to the aggressive price hike and uncertain delivery, according to Japanese source. SilMag tries to expand the operation to provide alternative source for the buyers. World magnesium demand is estimated to be 700,000-750,000 tonnes per year. Japanese buyer source expects SilMag’s additional supply could represent around 5% of the world demand and would impact on the international market. However, SilMag could have trouble to make money for the operation when the international magnesium market is expected to drop in and after late 2008 due to output expansion by Chinese suppliers. Some estimate indicates Chinese output capacity is already 1.3 million tonnes per year and further expansion could result in oversupply.