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Magnesium prices are down due to a supply glut, but that doesn’t mean all is negative for the metal used in steelmaking and as an aluminum alloy.
Demand for magnesium in the United States is being supported by solid automobile sales, which is translating to strong volumes needed by the aluminum and die-casting sectors, according to Metal-Pages.
“Latest figures show that total vehicle sales rose 8.5% in April to 1.29 million vehicles in the month, but dipped below a seasonally adjusted rate (SAAR) of 15 million units to 14.92 million vehicles for the first time since October last year due to weak commercial customer (fleet) sales.”
Reuters reported that even though auto sales for April came in under expectations of 11 percent growth, the big 3 US automakers — Ford, GM and Chrysler — gained share “… as improvements in the housing sector played to Detroit’s traditional strengths: pickup trucks and sport-utility vehicles.”
The rosier demand picture in the States however is not likely to kickstart the magnesium price which is under downward pressure due to lackluster demand in other parts of the world, said Metal-Pages.
“Buying activity in the domestic spot market remains sluggish as most consumers live off long-term contract deliveries and concerns over volumes into end-markets deters companies from building forward positions.”
As of May 8, the US price for magnesium (99.9-percent magnesium min) was down to $1.92 to $2.12 a pound from a previous range of $1.95 to $2.15 per pound.
Meanwhile, the European steel industry is calling on the London Metal Exchange to reduce the growing queues for materials like magnesium and zinc that are sitting in warehouses waiting for delivery.
Reuters reported that EUROFER, a leading consumer of industrial metals, has told the LME that its current rules do not require the stored metals to be delivered fast enough, which is causing artificial shortages, high metal surcharges, and problems linked to backlogs.
“EUROFER strongly believes that LME warehousing load-out rates are preventing natural market principles of demand and supply,” the group said in a letter to the exchange this week.
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.