EU magnesia market fails to bow under Chinese pressure

By Davide Ghilotti
Published: Friday, 10 March 2017

European magnesia prices are holding as the lower offers from China have not generated the sudden knock-on effect that was first feared, while EU producers reported higher demand from customers who cannot source meaningful volumes from China

The European magnesia industry is holding its breath as it waits to feel the full force of China’s quota-free export system and lower prices, while quotes for EU material have remained stable and demand is reportedly holding strong.

Local suppliers have been bracing themselves for further price pressure and potential supply disruptions since the Chinese government cancelled the export quota before Christmas.

But while some European buyers have reported difficulties sourcing Chinese material in recent weeks prices of western magnesia products have held stable.

The cancellation of the export duty on magnesia – dead burned (DBM), caustic calcined (CCM) and fused (FM) material – last year triggered a swift downturn in Chinese FOB prices, which could be seen already in mid-January.

At the same time, the downtrend in China appears not to have had the knock-on impact on the rest of the world markets that many had feared, creating sudden oversupply and falling prices across the board.

"So far, nothing has happened that came to affect directly our business," a European magnesia producer told IM.

The market remains cautious however and has not discounted that there could still be repercussions for the ex-China markets.

"We are prepared to face an impact. There will be one – that goes without saying, but it’s taking longer than we first thought. We could see it from Q2 or in the second half."

The source added that he had not received pressure from his customers to move his prices downward on the back of China’s lower offers.

Magnesia Carbon in different shapes.jpg (815.5 KB)  
 Magnesia carbon bricks. (
Source: Dalmia Bharat)

Another European-based supplier held a similar view: "We expected a more sudden impact on the market, but we haven’t felt that as of yet. There was no pressure on our price levels."

According to IM’s assessment on 9 March, European-origin magnesia prices have remained stable against previous weeks.

European fused magnesia is currently priced at a range of $480-650/tonne FOB Europe, while calcined agricultural magnesia stands at €240-300/tonne CIF EU port.

Electrical grade fused magnesia is priced at a range of $1,500-2,450/tonne ex-works UK.

Raw magnesite, max 3.5% SiO2 content, is also stable at €65-80/tonne FOB East Mediterranean.

As regards North American product, electrical grade fused magnesia is trading at $1,700-2,500/tonne ex-works US, while refractory grade fused magnesia stands at $900-1,400/tonne FOB US.

A third supplier with operations in Europe spoke of "some pressure from some of our customers" who pushed for a price adjustment, but added: "So far, we don’t see a need to do so."

Short availability

In terms of demand flows, European producers reported a growing amount of enquiries in 2017 so far compared with last year.

"Enquiries are on the rise from customers in Europe," one of the producers said. "We see a clear positive trend in number of orders this year so far."

The other producer reported a similar scenario.

This may be connected to what a number of sources in conversation with IM referred to as a lack of availability of Chinese material reaching Europe at the moment.

One central European trader told IM: "In the case of some products – such as large crystal FM – there is less going around."

The first producer added said that Chinese CCM and FM were thin on the ground as of late. He added that customers have come to him to ask for the material (especially fused magnesia) as they could not get enough from China.

The second supplier added: "We see a lack of material coming in from China, and this is leading to higher demand from our customers. The Chinese are selling cheap, it’s true, but product is hard to find.

"No one has asked us to reduce our prices until now," he added.

Despite China being one of the largest suppliers of magnesia, the first producer stated that Europe is "not so dependent" on Chinese material, as it can rely on local production as well as solid import channels from other producing areas such as Turkey, Russia, central and Latin America.

Still, as IM reported last month, official Chinese customs data showed magnesia exports from China surged in January. Official data does not however identify where the material was exported to.

Chinese prices 'won’t last’

Liaoning_Birger Hoppe  
 Liaoning Province.

The bearish price scenario within China may not last, however.

One view that is being held by a number of market participants, both within China and elsewhere, is that prices of Chinese magnesia may be pressured upwards once again in the near future, owing to decreasing production capacity.

In a bid to reduce the escalating pollution levels in the country, Chinese environmental regulators have kick-started a widespread check-up of the local magnesia industry to ensure that operations stay within the prescribed pollution thresholds, and that environmental norms are followed.

As reported in February, Anshan and Haicheng – two cities in Liaoning province, the main magnesia producing area in the north of the country – have been running inspections of over 100 local companies. The controls resulted in shutdowns and fines being issued to those facilities whose operations did not respect pollution norms.

"We are keeping a close eye on what is happening in China. [The closures] will result in lower, or intermittent, supply, which in turn could push prices upwards again," the first producer told IM.

"The low prices won’t last for long," the second supplier said. "Just wait until the shutdowns dent into stockpiles and local supply is meaningfully reduced."

A number of Chinese producers in touch with IM this week stated they expect prices to increase due to tight supply.

For information on magnesia prices please go to Industrial Mineral's Pricing Database