Magnesia consumers in Europe have been working through large
inventories since 2019, after a period of active buying in 2018
when refractory producers and steel companies built up their
stocks in response to higher prices at that time.
Market sources began 2020 looking for stabilization in the
market, if not recovery, after refractory consumers started to
trim down their swollen inventories. The Covid-19 pandemic,
however, heavily disrupted the global steel market, which is
one of the main drivers behind magnesia demand.
The combination of temporary lockdowns in key producing
areas, as well as the broader economic uncertainty and fears
for the future of the automotive and construction industries,
has brought about a sharp drop in steel production this
Magnesia is used as a refractory material in the bricks and
cement in the construction of furnaces for steelmaking.
Consequently, while steel producers experienced tightening
margins and slower production, refractory purchases slowed.
This, in turn, drove lower refractory product manufacturing
and, therefore, less demand for refractory raw materials.
For example, steel production in the EU was only 10.16
million tonnes in June 2020, down by 24.6% year-on-year, data
from the World Steel Association (Worldsteel) showed.
Furthermore, over the first six months of 2020, steel output in
the region was 68.28 million tonnes, down by 18.7%
Turkish steel production has been relatively more resilient
than EU output. This reached 2.8 million tonnes in June 2020,
up by 4.1% year-on-year, Worldsteel data showed. Production in
the first six months of 2020 was 16.29 million tonnes, down by
In August, industrial mineral group Imerys announced that it
was to buy Turkish refractory producer Haznedar and expected
the deal to close in the fourth quarter of 2020, subject to
regulatory approval. Imerys said that the deal would
"strengthen its position within the attractive and growing
Steel output in the Commonwealth of Independent States,
which includes Russia and Ukraine, was 7.95 million tonnes in
June, a 5% year-on-year decline. Output in the first six months
of 2020 was down by 4.1% year-on-year, to 48.92 million
Demand from the cement sector, another major refractory
purchaser, has also been slower due to the major uncertainty
over prospects for the construction sector amid the Covid-19
pandemic, and while European markets slipped into
Overshadowed by China
Exports from China, the world’s leading
magnesia producer, have continued to lead the direction of
prices in Europe, with magnesia produced in Europe remaining
more expensive than Chinese product.
Fastmarkets assessed the price of magnesia, fused, 97% MgO, cif Europe, at
$500-650 per tonne on August 18, down from $550-700 per tonne
on July 21. The corresponding price assessment for magnesia, fused, 98% MgO, lump, fob China,
was $550-650 per tonne on August 18, down from $580-680 per
tonne the week before.
The prices of material from Russia and Turkey have been less
volatile than Chinese prices due to a less active spot market
and a greater reliance on long-term contracts, which have
failed to match the drop in fob prices in China.
Magnesia producers in Europe have struggled to emulate the
low cost of production for Chinese miners and processors. In
early 2020, for example, refractory producer RHI Magnesita
suspended its fused-magnesia production facilities in Posgrunn,
Norway, and Contagem, Brazil, and entered long-term supply
arrangements to meet demand for the material.
Magnesia end-users have reported that the disruption
following the Covid-19 pandemic slowed the rate of depletion of
the high stocks in Europe to a crawl. Sources were unclear,
however, on just how low the stocks have fallen because of the
lack of new purchases that would show a gauge of customer
"We think [end-user] stocks are getting low," one refractory
producer told Fastmarkets in August. "But we
haven’t seen much buying yet. We were expecting
purchases to have restarted months ago, but now
it’s hard to say."
On August 18, 2020, Fastmarkets reported the price of
magnesia, fused, 97% MgO, cif Europe, at $500-650 per tonne,
down by 41% compared with $900-1,050 per tonne a year earlier
on August 20. The price for Chinese imported material was
represented by the bottom end of that range, while supply from
the eastern Mediterranean was still trading at a higher
"Chinese dead burned magnesia is so cheap now that I
don’t see how anyone has any margins," a European
trader told Fastmarkets. "Fused magnesia is tracking lower, but
it’s dead burned magnesia that’s
adding the real pressure… [European sellers] have a
different business model. They just can’t match
European dead burned magnesia prices have declined less
sharply at 22% year-on-year, with Fastmarkets assessing the
price of magnesia, dead burned, 95% MgO, fob
Europe, at $400-500 per tonne on August 18, compared with
$500-600 per tonne a year earlier on August 20, 2019.
The aforementioned European trader was cautiously optimistic
that activity could restart later in the year, however.
"The summer [slowdown] started earlier this year and it will
last longer," the trader said, "but we hope to see a return to
This article was first published in the September 2020 issue of Metal Market
Magazine, which carries in-depth feature articles, analyses
and reviews of metal and steel markets.