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Sluggish demand in the Eurozone is likely to keep magnesium in the lower end of the price range for the next few months.
Photo by Johntex published on Wikimedia Commons.
Magnesium is likely to be stuck in the doldrums for the next few months, with demand for the specialty metal sluggish, particularly in Europe.
Metal-Pages reported that magnesium prices are likely to face downward pressure as lack of demand increases the amount of magnesium flowing into the market:
“With demand across Europe and parts of Asia also diminishing, a glut of metal has built up and holders are being forced to cut prices in order to generate potential interest from consumers, traders note.”
A discrepancy in prices is building between US producers such as US Magnesium, which is selling magnesium at the high end of the price range, and overseas producers that are cutting their prices. But according to Metal-Pages, demand from the booming auto and construction sectors could help support the price, with recent figures from the North American Die Casting Association showing 6 to 7 percent growth in the first four months of this year compared with last year’s volumes.
Meanwhile, the situation in Europe does not look promising, according to metals consultant INTL FCStone, which gave a gloomy outlook for the Eurozone economy, and metals sector, in its latest monthly commodity report.
Analyst Edward Meir said in the report that output in the Eurozone fell 0.2 percent in the first quarter and that all countries except Germany are now in recession:
“Growth has decreased in the euro zone for six straight quarters, the longest stretch since World War II.
“Purchasing managers reported a 22nd successive decline in new orders this past month, with the rate of deterioration accelerating for a third straight month.
“Meanwhile, unemployment across the region is at a record high.”
A grim forecast from the European Steel Association didn’t pull any punches either, with the head of the association predicting that the European steel market will fall this year and is unlikely to ever regain its 2007 peak.
Gordon Moffatt told The Wall Street Journal that steel consumption in the EU is set to drop 3 percent, from 142 million tonnes last year, to a level 30 percent below the 201 million tonnes consumed in 2007. In addition, he said the market is dealing with a 300-million tonne supply overhang, most of it in China, which is keeping prices depressed.
About 13 percent of magnesium is used in steelmaking, with 45 percent used as an alloy with aluminum and 35 percent consumed in magnesium alloys in structural metals.
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.