China’s primary magnesium supply base accounted for around 85% of world production in 2020 and, with Russia included, this figure increases to around 87%. Chinese magnesium producers can achieve a low cost because they take advantage of waste heat energy associated with coal gas production to drive the process, which they acquire virtually free by co-locating with coking ovens. The disadvantage is that the Pidgeon Process consumes around 1 tonne of ferro-silicon (FeSi) for every tonne of magnesium produced, meaning magnesium costs are strongly correlated with Fe-Si prices and, by association, steel prices.
Aluminium alloying is the single largest market sector for primary magnesium, closely followed by die-casting, then steel desulphurisation at a distant third. Die casting and desulphurisation both have substitutes, meaning both are sensitive to fluctuations in magnesium prices. Chinese magnesium is exported across the globe to be consumed by the world’s aluminium industry.
So what might happen if Chinese costs are forced higher or supply becomes constrained? Even more critically, if China’s magnesium tap turns off, where does it leave the world’s aluminium industry?
CM’s China Magnesium Market Monthly Update provides a focused assessment of China’s primary magnesium market and the forces shaping its trajectory, particularly its supply base, cost structure, prices and, critically, the impact of Chinese policy on its future direction. CM’s China-based magnesium team have been monitoring the industry for decades and, through this Market Monthly Update, subscribers receive unrivalled, bottom-up data and industry analysis along with insights that can only be generated through deep knowledge and close industry contact.