Supply Tightness in China Impacts Global Magnesium Compounds Industry
President Xi Jinping is focused on pollution control (as well as economic growth) for his second term, with implications for the global supply chain in magnesium compounds, as well as many other industrial raw materials.
Robust Chinese government anti-pollution measures reaching out across the country’s mining industry from early 2017 have prompted the closure of many magnesia calcination and fusion plants, according to Roskill. This led to a sudden reduction in supply and concern over the future of China’s magnesium compounds supply chain.
China has dominated the world magnesia supply for decades, accounting for 70% of world magnesia production capacity and 60% of world production. Production in China is focused in Liaoning province. The main magnesia-producing region within Liaoning province is then split between two hubs: Dashiqiao in Yingkou and Haicheng in Anshan. Dashiqiao has less magnesite resources but more processing companies, while Haicheng has larger magnesite resources and primary mining companies. The mining of magnesite and production of magnesia in both regions have been severely affected by a combination of limited explosives provisions for mining and environmental inspections by the government, leading to plant closures.
By late 2017, supply shortages had become severe. In addition to the issue of plant closures due to environmental inspections, government control of explosives interrupted magnesite ore extraction and thus feedstock to caustic calcined (CCM), dead burned (DBM), and fused (FM) magnesia plants. Ore shortages were exacerbated in early 2018 by a ban on illegal magnesite mining in Haicheng.
China’s 13th Five-Year Plan (2016-2020) sets clear objectives for a more environmentally friendly China. For the first time, eight obligatory environmental quality targets were included in the plan. President Xi Jinping is focused on pollution control (as well as economic growth) for his second term, with implications for the global supply chain in magnesium compounds, as well as many other industrial raw materials. Magnesia prices in China in the second quarter of 2017 tripled over those seen in the first quarter of the year and stayed at $630-740/t for 97.5% MgO, lump DBM, FOB China into the Chinese New Year in February 2018. By August 1, 2018, the price of DBM 97.5% MgO, lump, was being reported at $1,100-1,350/t FOB China.
Supply tightness affecting magnesia markets is expected to persist for the foreseeable future. High-quality magnesia prices remain firm on a lack of raw materials as the Chinese government continues to exert strict controls on mining.
For more information, visit https://roskill.com.