Dependence on magnesia supply from China grows

By Sofia Okun
Published: Tuesday, 17 May 2022

Challenges to magnesia supply have increased global dependence on China and are encouraging the recycling of refractory materials.

This year has brought new challenges to the magnesia market. Chinese producers had already been going through a series of production restrictions, while European counterparts tried to deal with increased costs.

The war between Russia and Ukraine, which removed some production from the market, has added further pressure. "The market got tougher," a magnesia producer said, summarizing the overall sentiment.

By early 2022, the European market in particular was struggling with high energy and transportation costs, which had been especially painful for energy-demanding grades such as fused and dead-burned magnesia.

The war in Ukraine increased pressure on the market because materials from Russia and Ukraine became hard to source and ties between Russian producers and the rest of the world were broken. After the war began on February 24, sanctions imposed on Russia by the West have had a significant effect. "I have been working for 15 years to develop a customer base in Russia, and now it is all gone," one manager said.

The biggest Russian magnesia company, refractory materials producer Magnezit, has not faced sanctions, and exports of magnesia products from Russia have not been banned at the time of writing. But European buyers have started avoiding Russian material anyway.

"European refractories that used Russian material are looking for a replacement, because shipments are difficult," another European producer said in late February.

The largest container-shipping companies stopped delivering cargoes to and from Russia in early March. Logistics to and from Russia remain problematic.

"There is definitely a tightness," a European producer source said, whose customers are "buying what they can get" to avoid production pauses. In his assessment, the situation is much worse than last year, when logistics had been the only issue.

A European consumer said that he now avoided any Russian material because of potential reputational risks. "We are not doing anything with Russian material, and we do not know who does," this source said, adding that an overall tightness of supply is continuing. "It is impossible to make long-term forecasts," he said.

Despite the headwinds, Fastmarkets’ monthly price assessment for magnesia, fused, 97% MgO, cif Europe, fell to $900-1,100 per tonne in April from $960-1,230 per tonne in February, with some material supplied by China starting to ease tensions in the market.

Magnesia, fused, 97% MgO, cif Europe  

Chinese deliveries slow

Magnesia products from China have remained available on the global market, despite the logistical headwinds.

In early 2022, consumers of Chinese material stocked up, preparing for a pause in production during the Olympic Games in February. In the first two months of 2022, China’s exports of fused magnesia reached 121,831 tonnes, up by 25% year-on-year. For the same period, exports of dead-burned magnesia were 236,907 tonnes, up by 38% year-on-year.

Later, the market felt extra tightness from surging numbers of Covid-19 cases in China, which caused production restrictions and challenging logistics. Since mid-March, the province of Liaoning, the main production hub for magnesia, saw reduced output, lockdowns and logistics restrictions, which resulted in shipment delays.

Nevertheless, prices for Chinese material remained stable or have edged a bit lower since late 2021, driven by good availability of material, one European consumer said. Fastmarkets assessed the price of magnesia, fused, 97% MgO, Ca:Si 2:1, lump, fob China, at $750-850 per tonne on March 22, unchanged since March 1.

Similarly, Fastmarkets’ assessment of the spot price for magnesia, dead burned, 90% MgO, lump, fob China, was $270-300 per tonne on March 29, unchanged since March 1.

Increased recycling rates

It remains to be seen if the supply tightness will contribute to increased demand for recycled refractory materials, but the beginning of the year saw a new refractory recycling joint venture. Refractory material producer RHI Magnesita announced its partnership with recycling company Horn & Co to form a new joint venture with recycling facilities in Germany and Austria.

RHI Magnesita plans to increase the recycling rate to "more than 10% in 2025," saving 1.8 tonnes of carbon dioxide for every tonne of recycled material used.

Nearly all used refractory materials formerly went to landfill, but now most used refractory materials are re-used in applications such as aggregates for infrastructure projects.

A spokesperson for RHI Magnesita said that from the supplied new refractories, on average 40% is consumed in the process, meaning that only around 60% is remaining after application in products. After that, about half of this remaining volume is land-filled.

The challenging logistics and increased prices for virgin raw materials now prevalent encourage further development and usage of local recycled material sources, RHI Magnesita said.

Another producer, Vesuvius, also sees value in recycled materials. As it reported recently, 7% of raw materials used will be recycled materials from external sources by 2025, increasing the rate of closed-loop recycling.