Chinese magnesia prices were mostly stable in the first
eight months of 2021, supported by tight supply amid strict
environmental regulations and continuous restocking from
downstream refractories makers, resulting from the Covid-19
But downstream demand for China’s magnesia is
expected to weaken because of the country’s
reduced steel output in the second half of this year, driven by
decarbonization efforts and the hosting of the Winter Olympics
in the first quarter of 2022, when new pollution control
measures are likely to be imposed.
China is expected to reach peak carbon by 2030, and carbon
neutrality by 2060. To help achieve this, in the second half of
2021, Chinese authorities have called for steel production to
be kept to a level that does not exceed last
In July 2021, crude steel production globally and in China
showed month-on-month decreases.
According to the World Steel Association (Worldsteel), China
produced 86.8 million tonnes of steel in July, down by 7.56%
from 93.9 million tonnes in June.
Demand for magnesia, a key raw material for refractories, is
linked to crude steel output. As such, more market participants
expect it to be difficult to raise China’s
magnesia prices because of the weakness in downstream sectors.
"Reducing steel output will definitely affect demand for
refractories, which will in turn affect demand for refractory
raw materials, so I think China’s magnesia prices
will remain stable or soften over the rest of this year," a
magnesia consumer source in China said.
Steel production, especially in Hebei province, is expected to
be limited in the first quarter of 2022 by the Winter Olympics,
which will also have the effect of slowing down purchasing
activity for magnesia, market participants said.
"The coming 2022 Winter Olympics are expected to affect demand
for magnesia, with production limits expected during the
period, especially at steel mills in the area surrounding
Beijing," a magnesia producer source told Fastmarkets.
"I heard that the Tangshan government has already begun to seek
feedback from local steel mills about production cuts and
pollution control measures. I think it will not affect magnesia
production too much because Liaoning province, the production
hub for magnesia, is some distance from Beijing and Hebei," he
No significant decrease in China’s magnesia prices
is expected because of the strict environmental regulations at
a time of continuing industry consolidation.
The provincial government in Liaoning stepped up its efforts to
restrict magnesite mining activities, and a series of
environmental regulations were introduced in the first eight
months of 2021. Small-sized companies that failed to reach the
required emissions standards gradually stopped production,
which meant that some of the lowest prices in the market were
no longer available.
The Liaoning government, together with authorities in different
cities in the province, continued to push for the consolidation
of the domestic magnesia industry by implementing quotas on
magnesite production to curb overall output. This would also
support magnesia prices.
"According to the local government in Liaoning, each city might
have further policies to control magnesia production, so I
think [the price of] magnesia will not decrease although
short-term demand remains weak," a second magnesia producer
"The price level is fine now, and can satisfy all parties.
There are not many reasons for prices to go down," an overseas
buyer of magnesia said.
Fastmarkets’ assessment of the spot price for
magnesia, dead burned, 97.5% MgO, lump, fob China was $380-450
per tonne on August 24, unchanged since December 22,
The corresponding weekly price assessment for magnesia, fused,
97% MgO, Ca:Si 2:1, lump, fob China was $550-620 per tonne on
August 24, down slightly from $550-630 per tonne on July 6,
where it had been unchanged since January 5 this year.
International steel recovery
Market participants expect a recovery in international
steel markets after September, in contrast with
China’s policy of reducing steel output.
In Europe, demand for heavy steel has been weak over the summer
vacation period, but market participants expect it to recover
in September, following the traditional cycle.
In the United States, market participants await a new round of
price-increase announcements amid a tight spot market and the
likelihood of a large federal infrastructure investment that
will boost demand for US-made steel plate.
Although demand for refractory products is expected to be firm,
and to increase in Europe and the US, the whole industry has
been affected by problems with the availability of
Global logistics issues, including increased freight costs amid
a shortage of containers and vessels, are set to drive
commodity prices further upward. One buyer described the
situation as "an absolute nightmare."
Transportation costs put pressure on raw materials, and
companies were expected to try to pass the costs to customers
in the second half of 2021. Global refractory producers
Vesuvius, RHI Magnesita and Saint-Gobain cited freight costs
and increased raw material prices as a reason to raise their
prices, in recent financial reports.
The Baltic Exchange Dry Index, used for bulk shipment prices,
and the Shanghai Container Freight Index, used for container
shipping, both peaked in August. "Until mid-next year, we will
not see any improvement [as regards] containers and shipping,"
a European trader said.
Traders are paying double the price they did in March, the same
trader said. Vessels are fully booked a month in advance, and
customers are competing for space and offering premiums, a
second European trader said.
When shipping magnesia, big bags in bulk are used instead of
containers to reduce transportation costs, three market
Buyers cannot afford spontaneous purchases and need to order in
advance, the first European trader said. "If you want to have
material in January, you must buy it now," he added.
The production restrictions in China and the logistics
challenges are driving demand for non-Chinese material, one
producer source said. Three European market participants
"All the magnesia plants outside China are loaded," a European
seller source said. The price for magnesia, fused, 97% MgO, cif
Europe, increased to $600-700 per tonne on August 17, from
$550-650 per tonne earlier in the summer, according to
But the supply raw materials in the European market is tight.
"Russian [market participants] have supply, but are keeping it
to themselves; Brazil, Australia and Jordan have some, but this
is not enough to replace Chinese supply," a European buyer
"We are seeing additional demand and we are sold out," an
ex-China magnesia producer source said, attributing the
increased demand to the situation in China, adding that bids
have been heard from Japan, India, Europe, and both South and