China’s central government has
imposed strict environmental restrictions and carried out
inspections on heavy industries since 2019 in provinces
including Shanxi, Liaoning and Shandong, as part of
China’s 'Blue Sky Protection
Campaign’. This is a three-year plan, which
started in July 2018, aimed at curbing environmental pollution
and improving the air quality in China.
The government has continued its environmental
push during the 2019-2020 autumn-winter season, from November
2019 to March 2020, to support the results achieved in the
past two years. Most of China’s northern provinces
are now subject to restrictions on key polluting industries
such as steel, cement, glass and others.
These restrictions by the Chinese authorities on
polluting industries are now hitting downstream demand for some
refractory raw materials, and have negatively affected their
production. The markets of these raw materials became quieter
ahead of the Lunar New Year, with most market participants
leaving for the holidays.
Magnesia in Liaoning
Magnesia is a key raw material for refractories,
which is widely used in kilns for smelting steel. Production
curbs on end-markets including steel and cement during the
winter heating season have led to a deterioration of the
upstream magnesia market.
With the Chinese New Year starting on January 24,
factories were due to be closed until the Lantern Festival,
which is celebrated on the fifteenth day of the first month in
the lunar calendar, marking the last day of the Chinese New
"Demand for magnesia has been affected by the slow
downstream demand due to the environmental restrictions, and
magnesia prices have been falling sharply since 2019 until now.
With the approach of the Lunar New Year holiday, the market has
become stagnant with no transactions seen," a producer
source told Fastmarkets.
Fastmarkets’ price assessment for
magnesia, dead burned, 97.5% MgO, lump, fob China, was $400-450
per tonne on January 21, unchanged since December 17, but down
from $1,100-1,300 per tonne at the start of 2019.
The stricter norms have led to remarkable signs of
innovation in the magnesia industry. According to the Anshan
Ecological Environment Bureau, some 1,246 magnesia kilns
operated by 116 magnesia companies have been installed in
Haicheng, Liaoning province, with on-line monitoring equipment.
The data shows that the emission of pollutants from all these
kilns is within the accepted thresholds.
"The air condition in Haicheng is better than it
was before due to the environmental inspections, and I think
the environmental inspections will remain strict in 2020," a
second producer source said.
Fused alumina and
Since the Code Red emergency response protocol at
the beginning of November in Luoyang, Henan province,
China’s fused alumina production hub has been
under rigid environmental regulations.
Factories were closed for the Chinese New Year
holidays, but according to fused alumina producers in Henan
province, normal production might be delayed until the end of
the winter shutdown season.
In principle, a mass operation shutdown will
result in a shortage of supply, which will support prices. But
weak demand from the refractories sector has offset the tight
supply for brown fused alumina (BFA) and its feedstock of
refractory grade bauxite, leading to a relatively stable price
trend for both.
Fastmarkets’ fortnightly assessment
of alumina, fused brown, min 95% Al2O3,
refractory sized (0-6mm), fob China, was at $720-730 per tonne
on January 9, up $10 per tonne or 1.4% from its previously
stable price of $710-720 per tonne.
Meanwhile, bauxite, refractory-grade,
85%/2.0/3.15-3.2 (0-6mm), fob Xingang, was assessed at $385-395
per tonne, up $5 per tonne or 1.3% from $380-390 per tonne, a
level it has held at since the end of October. This price
movement was mainly due to the appreciation of the Chinese
yuan, according to market participants.
At the beginning of the winter season, the air
quality in Shandong province was better than that in Henan, but
that situation had changed by the end of the year. Graphite
production in Shandong was not significantly affected by the
environmental regulations until the end of December when local
air quality deteriorated, according to market
This resulted in a suspension of production until
the Chinese New Year holiday season. But some sources believe
that the environmental curbs were not the only reason behind
the closure of graphite factories.
"Most graphite producers in Shandong stopped their
production of the raw material in the second half of 2019
because of a weak end-market and a depletion of local
resources," a graphite flake producer in Shandong province
The production suspension, as well as the seasonal
halt in Heilongjiang province, have contributed to supply
tightness of certain grades of graphite flake, which has helped
offset the headwind brought about by a weak
Fastmarkets’ assessment of graphite
flake 94% C, +100 mesh, fob China, stood at $690 per tonne on
January 16, unchanged since the middle of November. Prior to
this, the price ticked up by $10 per tonne or 1.5% on supply