Alumina Bounces Back Amid Volatility; Magnesium Prices Edge Up Slightly.

Recently, the alumina market has shown a seesaw pattern between bulls and bears. The supply side features a "three-pronged" situation: some enterprises in Shanxi have resumed production after technological upgrades, while a few capacities in Henan have been restricted due to environmental regulations. Meanwhile, new production capacity in the southwest region is continuously being released, maintaining a loose market expectation. The average cost line of the industry has risen to the range of 2,650 to 2,750 yuan per ton, and the recovery of spot market transactions provides a phased support for prices. US Treasury Secretary Janet Yellen's latest statement indicates that the negotiations on the China-US trade agreement may extend to 2024, and the previous rumor of "substantial tariff cuts" has been officially denied. Despite the LME aluminum price rising by 1.2% within the week driven by sentiment, under the current tariff policy, China's aluminum products still face an additional cost pressure of 15% to 25% for exports.

Magnesium prices have continued to show a stable and slightly strong trend, with the spot price in the main production areas rising by 2.3% compared to the previous period. The supply side presents a "tight in the north and stable in the south" pattern: in the northern market, the inspection by the central environmental protection inspection team has led to a 12% decline in the operating rate in the Fugu area of Shaanxi, and some enterprises in Shanxi have started their annual maintenance ahead of schedule. In the southern market, the commissioning progress of the electrolytic magnesium project in Guizhou has exceeded expectations, with monthly output reaching 60% of the designed capacity. On the demand side: orders for automotive lightweighting have increased by 8% compared to the previous period, and large orders in the aerospace field continue to be released. Notably, as the summer peak electricity consumption approaches, the willingness of downstream processing enterprises to replenish inventories has significantly increased.

Overall, the alumina market is expected to maintain an oscillating pattern with an upper limit and a lower limit. It is suggested to pay attention to whether the Shanghai aluminum price will continue to oscillate within a range in the short term and the inventory turning point signal. The upward space of magnesium prices is constrained by the game between supply and demand: on the one hand, new domestic production capacity is gradually being released, and the commissioning of electrolytic magnesium projects in the southwest region is going smoothly; on the other hand, maintenance plans in the main production areas and the high cost of imported ore may limit supply elasticity. The market generally expects that magnesium prices will maintain an oscillating pattern.

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