Surging China Magnesium Price with 10% Tariff

International magnesium price keeps surging when Chinese government decided to add 10% export tariff on the ingot effective on January 1. Exporters of China, which represents 80% of magnesium world supply, could increase the offer to more than US$ 5,000 per tonne for January-March, which is 2.5 times higher than same period of 2007. However, some observers expect Chinese magnesium supply could increase by annualized 200,000 tonnes by June and the supply balance gets less tight. Chinese magnesium supply decreased since major coal mine explosion in Shanxi in December where many magnesium suppliers have smelters. Some smelters stopped the operations due to coal shortage. Japanese trading firms were forced to stop the price negotiation with Chinese suppliers for January-March due to the accident. Some Japanese trading firms restarted the negotiation with Chinese suppliers. However, the negotiation again stopped after Chinese government announced the 10% tariff. If the buyers would pay the all of the tariff, the import price could exceed US$ 5,000 per tonne. Some buyers shift to monthly based purchase from traditional quarter base. Chinese smelters’ industry is expected to expand the output by 200,000 tonnes by June. Many Japanese interests expect the Chinese price could decrease for April-June with the additional supply and some forecast major price drop in and after spring.