The magnesia market continues to be dogged by production
issues in China in the early part of 2018, while restrictions
that characterised the supply situation during most of last
year remain in place.
Readers of Industrial Minerals should be familiar by now
with the escalation of constraints affecting the supply side of
the minerals market in China, which produces and exports
several key refractory materials such as magnesia, graphite,
bauxite and alumina.
In magnesia, China accounts for about half of global
production. This has given the country a reference role in
supplying producers of magnesia-based refractories, especially
Throughout last year, however, sweeping inspections of
facilities and a clampdown on mining and processing practices
that were previously tolerated wreaked havoc on magnesia output
from the country.
During the third and fourth quarters of last year, export
volumes of the three main products – caustic calcined
magnesia (CCM), dead burned magnesia (DBM) and fused magnesia
(FM) – all showed declines compared with previous
years, after a surge in the first half that followed the
scrapping of an export duty previously applied on the
Shortage of material sent prices to record highs, especially
for high-grade DBM and FM into the beginning of 2018. As the
markets enter the second quarter of this year, a number of
factors that have squeezed supply and affected prices continue
to be apparent.
|Magnesia, dead-burned, 94-95% MgO, lump, FOB
Raw material availability
Following a series of state-mandated mining limitations in
magnesia-producing areas across China, such as Liaoning and
Heilongjiang, local producers continue to face challenges in
securing sufficient raw magnesite ore for processing.
This was seen throughout the second half of 2017 and
affected miners and processing operations. As was the case in
other minerals, mining was heavily restricted through a ban on
dynamite blasting and, in some cases, even on pneumatic
At the same time, government-led teams carried out thorough
inspections of processing plants to ensure that environmental
norms were respected. Those that were found in breach were
fined or shut down.
Restrictions to mining at magnesite sites remained in place
as of early March. Local producers said that they were still
unable to use dynamite.
This has created issues in sourcing enough high-grade raw
magnesite, which in turn is directly affecting local
companies’ ability to produce high-grade DBM, CCM
"Producers are having serious issues with quality of CCM,
because availability of high-grade ore from mines is low. This
means that those who use CCM as feedstock to produce FM would
then find similar issues in their final FM products," a
Another source active in magnesia trading said that
specification issues are now being seen, particularly with
Ca:Si ratios often said to be outside standard parameters.
|Given the magnesia supply issues in China it is no
producers such as Greece’s Terna Mag are
poised to fill the supply gap.
Consolidation plan dead in the water
The much-discussed plan to consolidate the fragmented
magnesia industry in China, meanwhile, has made no tangible
progress to date.
As it was originally laid out, two magnesia-producing
districts – Dashiqiao in Yingkou, and Haicheng in
Anshan – were planning to concentrate the magnesia
supply chain, from mining to processing.
This is not dissimilar from what happened with the Chinese
rare earths industry, where the idea was to create leading
state-owned umbrella groups – the largest companies
– and allow them to assimilate smaller operations, and
to close obsolete or very small facilities.
This would give the state-owned companies effective control
over mining, processing and trading.
But while the initiative made some progress following the
first announcement in the second half of 2017, with several
companies reported to have joined the group (the actual number
varied, depending on who you asked), progress quickly seemed to
Industrial Minerals understands that no real advance has
been made on the plan to date. As a result, it continues to be
a cause of concern, as well as annoyance, for local
One market participant travelling to China said: "When I
asked [local companies] about the consolidation, they just
laughed. They don’t believe it’s
At the same time, uncertainty about the issue may contribute
to keeping prices high until some clarity is achieved in the
|Fused magnesia is increasingly hard to acquire in
China, due to the
environmental shut downs.
Market prices for magnesia have shown diverging trends in
early March, with the price of high-grade DBM increasing while
the cost of low-grade material dropped.
The price of DBM 97.5% MgO lump increased to $1,100-1,400
per tonne fob China on March 6 from $630-740 per tonne in
previous weeks, while the price of 94-95% MgO material rose to
$680-700 per tonne fob China from $385-470 per tonne.
Still, soft demand for low-grade DBM caused prices of 90%
and 92% material to fall. The price of DBM 90% MgO fell to
$240-280 per tonne fob China on March 6 from $330-350
previously, and 92% MgO fell to $280-300 from $350-390 per
In some cases, FM prices also decreased from the peaks
reached at the beginning of the year, although they remained
higher than during most of 2017.
The spot price of FM 97% MgO (Ca:Si 1:1) dropped to
$1,150-1,250 per tonne fob China in March from $1,400-1,600 per
tonne previously, and 97% MgO (Ca:Si 2:1) fell to $1,250-1,400
per tonne from $1,600-1,800 per tonne.
Caustic calcined magnesia (CCM) prices remained stable. The
94% MgO fob China price held at $240-260 per tonne, 90-92%
MgO stayed at $205-230 per tonne, and 96% MgO remained at
$335-355 per tonne.
On the European market, prices remained firm while
non-Chinese producers continued to report high demand both from
ordinary customers and from those buyers who switched source
after failing to secure supplies from China.
Several producers outside China claimed to have contracted
almost all of their material for the first and second quarters
of this year, leaving only small volumes available for spot
Industrial Minerals assessed the price of European CCM,
agricultural grade, at €250-350 ($308-431) per tonne cif
Europe in early March, and the high-grade FM price at
$1,500-1,700 per tonne fob Europe. The price of raw magnesite
remained at €65-80 per tonne fob Eastern Mediterranean.