“Chinese magnesia disruption has turned supply/demand upside down”
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 since 2018 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 over the last three years 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. 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. Logistics both within China and worldwide were then disrupted significantly by the COVID-19 pandemic. Domestic Liaoning logistics are reported to have recovered quickly, with some reports of highway tolls being lifted during early 2020, but Rest of World (RoW) demand has now been compromised by the virus.
China’s 13th Five-Year Plan (2016-2020) set clear objectives for a more environmentally friendly China. For the first time, eight obligatory environmental quality targets were included in the plan. 2020 represents a transition year and the 14th Five-Year Plan will shape the first half of the 10-year forecast period in this new 14th edition of the Roskill market report on Magnesium Compounds. The Chinese government is in the process of compiling its new plan, which will cover development from 2021 to 2025. Premier Li Keqiang in November 2019 cited shoring up the Chinese economy as one of the government’s major goals, and that was before the current health crisis. Supply tightness affecting specific magnesia markets is expected to persist for the foreseeable future.