Several days before, the State Council meeting was convened and the detailed regulations were launched yesterday. The export of ferrosilicon products could not obtain tariff concession as expected except for magnesium metal. In addition, new tax preference measures are taken on the steel products and aluminum processing, which would revive the related enterprises and indirectly stimulate the recovery of domestic magnesium markets. However, such industries as magnesium, ferrosilicon, coke, coal, Portland charcoal, raw steel and pig iron, etc are restricted in re-investment and are not encouraged for export, so it is predicted that even if new policies are carried out, these industries could hardly enjoy the favorable measures.
In view of the Chinese government's investment of RMB 4 trillion to stimulate domestic demands, the consumption of bulk metal commodities would rapidly revive, but the influence on magnesium metal is relatively smaller; on the contrary, the industry of magnesium metal would further meet with the rising cost pressure along with the recovery of coal and ferrosilicon markets. Therefore, the possibility of price reduction would be very slim. In addition, given the future one week, we think the prices would remain stable, because 90% of the production capacity has been shut down and the demand for cash flow diminishes. It is workable as long as the capital could recycle at the end of the year. So, most enterprises would adopt the going-rate pricing and there are fewer possibilities of further pernicious price reduction except for some lower cost enterprises. Also, considering these inventories were made several weeks ago, the minimum cost shall be 17,000 RMB/ton and above.
