Chinese Magnesium Refiners Suffer from Worse Profitability

Chinese magnesium refiners are suffering from worse profitability when magnesium market price maintains weak while refining cost surges. Magnesium refiners in Shanxi Province especially seem to be losing its competitiveness. On the contrary, refiners in Shaanxi Province are increasing production volume.

The current offer price of Chinese magnesium ingot is C&F US$ 3,290-3,310 per tonne for Japan. The price has downed by US$ 50 in the latest month to reflect low demand and tough competitions among the refiners. Meanwhile, refining costs are recently rising mainly for labors and energy sources. Japanese trader source says most refiners would suffer from loss if magnesium market price cannot sustain US$ 3,400 at least.

Another trader source points out magnesium production by Shanxi Province refiners had represented 80% in China’s total magnesium production (including ingot, alloy and powder) until 2007. Presently the share is lowering to around 40%. Shanxi refiners lost competitiveness since restrictions were strengthened against illegal and anti-environmental operations of coal plants and magnesium refineries.

Statistics by China Magnesium Association (CMA) suggests magnesium (ingot, alloy and powder) production in Shanxi was approximately 500,000 tonnes per year for 2005-2006 but the production decreased to around 300,000 tonnes in 2010. The output is forecasted at 250,000 tonnes for 2011.

On the other hand, magnesium refiners in Shaanxi Province have steadily increased their productions in latest years, taking advantage of abundant gas generated from coke plants. Japanese trader source says magnesium production in Shaanxi was approximately 190,000 tonnes in 2010 while the volume is estimated to reach 250,000 tonnes this year.

Chinese magnesium (ingot, alloy and powder) production totaled approximately 640,000 tonnes in 2010, according to CMA. This year the production has kept almost the same level so far. Productions in Shanxi and Shaanxi total around 500,000 tonnes.