Mixed messages from magnesia market over plunging prices

By William Clarke
Published: Friday, 01 November 2019

Producers, consumers, and traders of magnesia debated the causes of a rapid drop in the prices of the refractory material and the prospect of further price falls at the annual Colloquium of Refractories held in Aachen, Germany, on September 25-26.

  • Mixed picture of price sentiment 
  • 2020 looks bullish 
  • Chinese supply curtailment

Magnesia prices have tumbled since the highs reached in early 2018, succumbing to pressure from the widespread stock build-up in the preceding bull market.

Fastmarkets’ price assessment for magnesia, fused, 97% MgO, Ca:Si 1:1, lump, fob China, was $650-750 per tonne on September 24. This compares with $1,000-1,100 at the start of 2019 and $1,400-1,600 at the start of 2017.

Despite the rapid fall in prices so far this year, a producer of
magnesia raw materials, with operations in China, struck a cautiously bullish note on prices for 2020 due to a shortage of magnesite ore.

Mining operations in Liaoning, China, stalled in August 2019, with a restart slated for the end of October. But cold weather production restrictions could limit the restart until the spring of 2020.

A company executive told Fastmarkets that production had not been affected by the shutdown so far thanks to strong ore inventories. But he conceded that the mining halt would eventually work its way through to magnesia products.

"In Q4, or Q1 next year, we expect to see [the effect of ore shortages]," he said.

The regional government in Liaoning appears to be committed to supporting prices by restricting supplies, he added.

Fused magnesia price will not be able to fall further, a senior executive at a major refractories trader claimed.

"I think they could go down a little bit still," he said. "But they cannot fall like they did this year."

But a source from European refractories producer painted a much gloomier picture. Demand for products remained extremely slow so there has been no need to purchase raw materials, he said.

His company’s most recent fused magnesia purchase was in 2018, he added, and had been expected to meet the company’s needs for six months. Instead, the company was now not expecting to buy before 2020.

Another refractories producer has bought magnesia in recent months "but I’m the only one who has," he claimed.

He made purchases to meet short-term needs, he said, despite limited demand for refractory products. But he is not expecting inventories to start building again until the start of next year at the earliest, he added.