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Nov 06

MagMin 2017: Magnesia supply shortage won’t last long, China says

MagMin conference delegates heard from the Chinese government that the severe supply squeeze that has hit the sector will not last long but no timescale can be given.

The magnesia supply shortage in China is not expected to remain for long but is unclear when production will normalise, Chinese government official told delegates during the MagMin 2017 in Dalian, China on 11 July.

MagMin was held in China for the first time. Global market participants gathered in the northern Chinese trade, port and industrial city of Dalian to discuss the harsh reality of the supply shortage in Liaoning Province, the main magnesia producing area, and to hear the view from the government. Other topics included the latest environmental techniques for the industry as well as professional presentations from downstream steel and refractory sectors.

The major area of interest for delegates was the government’s view on the supply squeeze. In Q2, China’s magnesia industry was hit by a severe supply shortage following environmental checks and dynamite restrictions, which led to all production being stopped without notice. It was considered a harsh move by upstream producers and downstream buyers alike and has left a lot of uncertainty in the market.

“The source material shortage will not continue for long,” Guangqi Han, Deputy Director of People’s Government of Liaoning Province, Special Industrial Resource Protection Office, told delegates.

He explained that the environmental inspections were not intended to restrict material but were about future development of the sector.

China has passed the stage of fast economic development at the expanse of environment, and the government is now looking at ways to develop the industry economically as well as environmentally, he said.

The government is yet to make a clear and unified standard on a national level, but it is working on it. No timeline has been confirmed.

“It won’t take long because even domestic steel companies won’t allow this to happen – they need to produce normally,” one Chinese delegate told IM. “A decision might be easy to make – so too a plan – but its execution is difficult. There are so many magnesia companies – if the government has a plan to control the total output, it won’t be easy to realise. [It is] not like the rare earths industry which has been consolidated into six major companies after years of painful regroupings as well as M&As guided by both central and numerous local governments, and needless to say the constant conflicts among different players,” one official from Liaoning Provincial Association of Nonmetallic Mineral Industry said.

Uncertainty persists, no end in-sight
The government’s message to delegates was that the supply shortage will not last long, but they do not know when it will end.

“What the government said is useless and completely bureaucratic; it doesn’t solve any problem or promise anything,” one Chinese producer said. “Even if they promise something, it feels empty and helpless because they don’t have a unified standard yet.”

“[When] the governments of Liaoning Province, Haicheng City and Dashiqiao City all showed up at this seminar; it means something – something serious,” another delegate said.

“Obviously the whole industry has no clue about what happened or what will happen, but at least the government is here to show they are paying attention. If they get many opinions from market players, even if they are just complaints, the government will know and do something. So this is a great chance for us to meet and talk with government officials, especially the provincial officials who sat at the seminar from the beginning to the end,” he added.

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