Chinese magnesia exports dwindling after early surge

By Davide Ghilotti
Published: Friday, 29 September 2017

China’s shipments of CCM, DBM and FM exceeded 1m tonnes in just over half a year but slumped over the past three months as production issues slashed availability.

China has exported as much magnesia in the first seven months of this year as it normally does in a whole year, but shipments have stalled and are now falling by the month.

The pattern of Chinese trade of magnesia products in 2017-to-date has been characterised by a surge in exports in the first few months of the year.

The increase was of such magnitude that Chinese trade in the seven months to July 2017 was equivalent to what the country exports in 12 months during an average year.

Chinese exports of all magnesia products – fused magnesia (FM), caustic calcined magnesia (CCM) and dead burned magnesia (DBM) – in the January to July period of this year reached 1.18m tonnes.

This included 254,319 tonnes of FM, 336,379 tonnes of CCM and 584,861 tonnes of DBM.

For comparison, last year Chinese exports stood at 1.21m tonnes. Between 2012 and 2016, Chinese annual exports totalled between 1.09m tonnes and 1.35m tonnes.

Notably, the first four months of the year recorded the largest share of activity. In the period between January and April, exports reached more than 735,000 tonnes. This is 63% of the 2017-to-date total.

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Conversely, in May to July, exports stood at a lower 440,479 tonnes. Monthly trade peaked in April and then gradually reduced in the subsequent months.

"Looking at the first half of the year, you would expect China to export 2m tonnes this year," a magnesia supplier told IM. "But this is not going to happen: as you can see, the latter months showed a substantial decline [in consignments]."

The pattern of trade seen this year was brought about by a number of factors that shaped selling activity, including export duties and quotas, prices and availability.

In December, the Chinese government opted to scrap the existing duty regime and quota system for exports of magnesia products from 1 January. Prior to that, export tariffs were set at 5% for CCM and 10% for both DBM and FM.

This led prices to decline in the first few months of this year, fostering buying activity on the part of consumers.

The price downtrend was short-lived, however. As Chinese authorities tightened the controls over industrial pollution, many magnesia operations were affected and had to shut. Unable to produce, producers resorted to selling from stockpiles, which rapidly decreased.

Short supply became evident in a matter of months, and prices moved upwards again.

By early May, virtually all magnesia production facilities had stopped and fused magnesia had become unavailable in Liaoning province. Prices of all three products surged during the summer months, exceeding pre-quota scrapping levels. 

Customs data confirms the reduction in availability, with a remarkable decline in volumes exported in May-July after the heights of the previous months.

As the issues surrounding production flows in China continue unresolved – with inspectors now back in Liaoning for a second round of inspections – further disruptions in production are to be expected. This will reflect on export volumes in the second half of the year.

Another European magnesia seller added to IM: "My take is that monthly exports will continue to reduce in the following months, as the statistics catch up with the production issues."