Prices of magnesium are beginning to show signs of easing after peaking in September as China’s power-intensive factories struggle to continue production due to energy shortages.
China has a near monopoly on magnesium, accounting for about 87 percent of the world’s supply, and recent moves to ration power amid an energy crisis have caused magnesium plants to either slash their output or shut down completely.
Prices hit a record high of as much as 70,000 yuan ($11,000) per metric ton in September just after doubling to about 45,000 yuan ($7,000) from just 27,000 ($4,200) in the first few weeks. But prices have since fallen back down toward 45,000 yuan in the last weeks of October.
The Shaanxi province which accounts for 60 percent of China’s magnesium has ramped up production to about 70 to 80 percent of its capacity since the start of October, according to Shanghai Metals Market (SMM).
“With producers ramping up, magnesium tightness is easing,” said Liu Hao, an analyst at SMM.
Europe, almost entirely dependent on China for magnesium, has been largely exposed to the increase in prices and drop in exports. European industry groups warned last week that the shortage threatened a “catastrophic impact” on the region.
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