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European magnesia prices firm in new contracts round

January 26,2018      views

Editor: Adam Zhang

Deals for fused magnesia in Europe are being set at higher prices in the early part of the year, amid tightness and low availability in the market, with the price pressure also affecting agricultural caustic calcined products.

European prices for fused magnesia (FM) are likely to remain firm during the early part of this year with the underlying drivers of demand remaining largely unchanged after a surge in 2017 market prices.

While the latest prices for European FM have shown a slight decline compared with the spot market levels assessed into the final part of last year, the market remains on the high side due to the continuing thirst for material while availability remains extremely tight.

The situation in China remains unclear following drastic production shutdowns in the country during 2017. As a result, customers seem keen to cover their needs for magnesia raw materials for at least the first two quarters of this year, according to market participants.

Suppliers have been receiving high volumes of inquiries from the main markets in Europe, Southeast Asia, Japan and other destinations, they told Adam.

Several of these inquiries have been for large volumes and, notably, relate to the long term.

"The continuing issues with China are forcing everyone to look elsewhere," one producer said. "Users cannot afford to just wait and see [how the market develops]."

The problems of availability are being felt all along the supply chain, one refractory maker told Adam earlier this month. "Our [end-user] customers first ask us if we are able to deliver the products," he said. "That’s their primary concern."

The existing market tightness is supporting European FM prices, which were assessed on Tuesday January 23 at $1,500-1,700 per tonne fob Europe.

This marks a slight decline from the spot market prices that were reached at the end of last year, but contracts being set at these levels confirm that the market remains under pressure into 2018.

"I do not expect much change during the first half of this year, unless something drastic happens to either supply or demand," the first producer said.

"We took a position late last year to increase our stock levels by several months," a second refractory maker based in Europe said. "While it was a risky decision, we did that to ensure essential coverage. What we don’t want is to get to, say, the second quarter and suddenly be short of raw material."

Prices in the FM market in Europe grew rapidly in the second half of last year, because reduced output in China triggered price growth in other supplier regions.

Market prices more than doubled during that period, setting new highs toward the end of the year.


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