“China magnesia supply tightness has turned the magnesium compounds industry around in 2018.”
China has dominated 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 processing companies. Mining of magnesite and production of magnesia in both has been affected severely by a combination of very limited provision of explosives for mining and environmental inspections by the government, leading to plant closures.
Robust Chinese government anti-pollution measures reaching out across the country’s mining industry from early 2017 prompted the closure of many magnesia calcination and fusion plants. This led to a sudden reduction in supplies and concern over the future of China’s magnesium compounds supply chain. By late 2017, supply shortages had become severe. As well as 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 magnesia (FM) plants.
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. These targets will direct the future of mining and processing in China for the first half of the 10-year forecast period for this new 13th edition of the Roskill market report on Magnesium Compounds.
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 Q2 2017 tripled over those seen in Q1 2017 and stayed at US$630-740/t for 97.5% MgO, lump DBM, FOB China into the Chinese New Year in February 2018.
Elsewhere in the world, Brazil and the European Commission approved the acquisition of Brazilian refractory maker Magnesita Refratários by Austria’s RHI. Magnesium compounds raw materials suppliers outside China reported improved financial results, supported by trends in refractory markets as well as the drama in China. In Europe, prices of European fused magnesia (FM) surged to exceed US$1,000/t in June 2017, following repeated increases in Chinese prices and extremely tight availability of material reflecting on international markets. These FM prices had surged to US$1,500 to 1,700/t FOB Europe by February 2018.
Supply tightness affecting certain magnesia markets is expected to persist for the foreseeable future.