Magnesium Industry Update From Clark & Maron
2010-05-17
Alan Clark of commodities consulting company Clark & Maron presented their findings on the state of the magnesium industry. Clark & Maron has been working in China for more than 10 years and covering the magnesium industry for more than 15. Clark & Maron has a full-time team in the field in China all the time.
In comparing the magnesium process to its peer group, according to Clark’s findings, primary magnesium prices have not recovered from the recent global crises like other metals. The other metals rely on China for its demand net imports, magnesium is a net export. In domestic China supply is down 20% and demand is down 28%. There has also been a domestic migration of the Chinese supply base.
The global magnesium supply has several raw material sources, more than 30 different processing options and is more complex when compared with primary alumina production. This recent downturn is the largest fall in global primary magnesium production since 1945. Although each time the industry has had a downturn it rebounded quickly.
In 1999, the global magnesium supply was 379,000 tons; China’s magnesium production was 123,000 tons. At this time two large projects in Australia and Canada contributed 287,000 tons of capacity. Peaking in 2008, China had roughly 80% of the supply base which took the industry by surprise. It is fair to say that some of these industries outside of China might not be producing if they did not have anti-dumping duties in place.
We see magnesium consumption going forward and are genuine believers in the magnesium die-casting automotive industry. But changes in the industry must be made and magnesium will be in much broader use in the industry. Supply and demand will begin to match closely due to Chinese capacity but we are forecasting a larger supply base outside of China. That means in terms of capacity China’s output will decay in terms of absolute output in primary magnesium. Issues that will affect magnesium are cost pressures, exchange rates, process efficiencies, technology advances, governments and legislation, industry consolidation, supply response, supply demand balance, and new facilities in countries outside of China.
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