24 Jul 08 - To many producers' disappointment, the magnesium market has not improved at all early this week. On the contrary, the price plummets again with participants losing confidence in the future market. The dramatic price decrease inevitably leads to panic sales. More producers, who start to abandon the unrealistic fancies about a better market soon, gradually surrender to the fact that they will have a hard time for a long period from now on.

A Shanxi-based magnesium ingot producer, with an output of 1,600tpm, reported that the domestic market has been in chaos during the past two days. Smelters lowered offers one after another to promote sales for fear that the price may decline further. According to the source, huge stocks can be seen in Shanxi's Taiyuan and Shaanxi's Fugu, the two main production bases for magnesium ingot. Other than the weak demand, the source thinks that another reason for the high stockpiles is that some producers were over-confident about the future market, so they held back from selling after the price started to drop in May and June.

The source had expected the market might continue worsening since the price started to go lower. Therefore, he is active in selling and under no pressure of stocks for the time being. According to the source, although many smelters have lowered offers to RMB26,000-26,500/t (USD3,812-3,886/t) ex works from RMB27,500-28,000/t (USD4,032-4,106/t) ex works seen last week, the market sees little business being done as buyers would not like to place orders in the slipping market. The price is expected to move down further.

A Shanxi-based trader confirmed the drastic price decrease in the past two days, adding that more producers fell into panic sales. "Although the price retreat is within our expectations, we has not expected that the price plummeted to RMB26,000/t (USD3,812/t) ex works within such a short period," said the source. "To some smelters in South Shanxi, the price of RMB26,000/t (USD3,812/t) ex works is lower than their production cost." However, all domestic consumers or overseas buyers have no plan to purchase, so bulk orders are seldom seen in the market. With more materials being piled up, smelters have to cut down offers to attract buyers. "We're seeing a buyer's market now," said the source.

The source predicts that the market will keep slipping on high stockpiles. "According to our conservative estimate, the quantity of stocks in Taiyuan is 15,000t at least for now, and the number may be 6,000-7,000t in Shaanxi's Fugu," said the source. "Under such a situation, producers should get themselves ready for a tough time."

The source received many unsolicited offers which decrease to RMB26,000-26,500/t (USD3,812-3,886/t) ex works from RMB27,000-27,500/t (USD3,959-4,032/t) ex works last week. However, he has no plan to buy for lack of orders.