US MAGNESIUM: Spot market looking for direction from 2013 talks
Washington (Platts)--17Aug2012/541 pm EDT/2141 GMT
US magnesium prices may soon find some direction on the back of 2013
contract negotiations, but most players have little sense of the next move
for prices following months of illiquid spot activity.
Most buyers appear to be in no hurry to book deals for 2013, though a
few said that primary producers have reached out early to try to get talks
Primary producers have reported continued strong contracted volumes for
2012, but virtually no spot activity. One primary producer reported a single
spot sale Friday -- the first in a couple of months -- at $2.25/lb, in
warehouse, for delivery in late August.
"Demand remains strong in the US on contracted business. Stocks are
low," the producer said.
One consumer said he believes magnesium supplies may be tightening up
since he had seen some delays in getting contract shipments from US
Magnesium. "They are definitely trying to push back deliveries -- I'm not
sure if it's due to their capacity coming online or getting orders," the
Cam Tissington, vice president of sales for US Magnesium, said there
have been no disruptions or delays in magnesium shipments. "However, we are
in a situation of declining inventories even though we are now up and running
at our new nameplate capacity of 63,500 mt/year," he said.
"And as we've completed the expansion of our Rowley, Utah, facility,
there have been production disruptions in our chlorine facilities that have
reduced our liquid chlorine production for the merchant market," he added.
Another magnesium buyer said he did not think there was much magnesium
available in the spot market. He also noted reports of more aluminum being
used in the automotive sector, such as for the Ford F150, which would mean
greater magnesium demand for aluminum alloys. However, he still believes spot
pure magnesium prices are at $1.98-2.05/lb in the US.
An aluminum buyer reported paying $1.87/lb for primary pure magnesium
early in August, and having also been quoted $2.00/lb by a primary producer.
"We had three quotes right in the ballpark," the buyer said, noting the
material was not off-spec.
Suppliers trying to sell at higher spot prices have said they think
there is some old Russian stockpile or Dow magnesium circulating, but this
could not be confirmed.
Traders said they have been unable to sell above $2 and several reported
offering 99.8% magnesium at that level and missing on one other recent sale
to an aluminum user. "I didn't hear exactly what it went for, but I don't
believe it went below $1.95," a trader said earlier this week.
A trader reported a sale of 90/10 alloy in early August in the low
$1.90s, but admitted that the buyer was "desperate, needed it that day."
Other diecasters and aluminum users said they were well covered with
contracts and not buying any spot product. One diecaster who saw diecast
alloy prices unchanged at around $2.00/lb said he would continue to buy on a
quarterly basis. A secondary producer recently said $2.10-2.15 sounded like
the right price range for spot diecast alloy.
One trader noted a pickup in business in early August, citing two spot
inquiries for September-December for Canada. However, they were for small
quantities, the trader said.
One of the buyers reported paying around $3,500/mt delivered Canada for
99.8% pure Chinese magnesium.
A trader who offered on the deal said with Chinese prices dropping at
the time, he'd had to lower the FOB China basis from $3,300 to $3,250/mt but
still did not win the business.
The buyer said some suppliers had raised their offers based on the
general increase in Chinese prices prior to this month's price drop, but he
said there were a "cluster" of offers at the level he paid.
Two US aluminum users said they had heard they should expect magnesium
from South Korea's Posco to start flowing in 2013. And a debate between
Posco's power provider and the city of Gangneung over whether power lines to
the plant should be buried. The dispute has caused construction on the 10,000
mt/year primary plant in northeastern South Korea to stop, but the plant is
Aluminum users also said they had seen some Malaysian magnesium offered,
but that Russian magnesium is unlikely to flow to the US given the expected
price level. Another market source said aluminum plants in Brazil were
"consuming a ton" of magnesium while European magnesium consumption is still
down about 5-10%.
--Karen McBeth, email@example.com
--Edited by Keiron Greenhalgh, firstname.lastname@example.org