2021 Review of Liaoning Magnesia Industry

Updated: Jul 22

China has dominated the world magnesia supply for decades. The uncertainty of the COVID-19 outbreak has made overall demand for magnesia was lower in the first half of the year in 2020, rebounding to January levels by the third quarter as global lockdowns were eased.

Magnesite resources

According to the U.S. Geological Survey, the world's magnesite resources are identified at 7.6bn. tonnes. The estimated reserves of magnesite in China is more than 1 billion metric tons as shown in Chart 1.


The total annual production of magnesite from China, is about 18 million metric tons, make up over 70% of the world production capacity as shown in Chart 2.

Although China didn‘t hold the largest magnesite deposits around the world, it continued to produce a significant proportion of the world’s capacity in the past decades.


According to a review of the world's natural magnesite resources and production by IM, 93% of the world's magnesite resources are the sparry (coarse) type and just 7% of the cryptocrystalline (fine) type.

For some deposits, such as China and North Korea, the sparry magnesite is massive and easy to mine. In addition, China's magnesite resource distribution is highly concentrated. There are around 27 mining areas distributed in around 9 provinces of China.


Liaoning province – China’s magnesia production hub, hold the largest China magnesite resource, according to the local source, as shown in Chart 3, estimated magnesite reserves in Liaoning province is about 3.52 billion tonnes, which takes up over 85% of China's reserves and about 22% of the world's reserves.



The magnesite resource in Liaoning province is distributed in Haichang and Xiuyan, Anshan city; Dashiqiao, Yingkou city; Fengcheng and Kuandian, Dandong city; and Fushun city, etc. However, according to the Anshan City Statistics Bureau (2020), 95% of Liaoning's magnesite resources are located in Anshan, which is identified at 2.76 billion tonnes. Meanwhile, there are around 40% of Anshan's deposits with theoretical maximum magnesia (MgO) content of 46%. Haicheng holds a large proportion of Anshan's reservers, over 70%.


Magnesite Export

According to the data from Huaon Research, the export volume of magnesite was increasing gradually in China, which peaked at 294,046 mt in 2017. Meanwhile, in the following years, China's magnesite exports are still growing and rose to 508,391 mt in 2020, up 19.25%.


Magnesite and Magnesia


Magnesite refers to the natural mineral, but there are three commercial grades derived from magnesite: caustic calcined magnesite (CCM), dead burned magnesite (DBM), and fused magnesia (FM). These differ mainly in density and crystal development that results different levels of heat application.


DBM and FM are used predominantly in the refractory industry, where they are mainly used to make shaped and unshaped products to line high temperature vessels such as furnaces and kilns in the steel, cement, non-ferrous, glass and chemical industries.


Magnesia Industry

China policy changes, coupled with the impacts of the global COVID-19 pandemic, have resulted in inconsistent supplies and restricted availability of all grades of magnesia in the world market.

Policy

The Liaoning provincial government released several policies response to the supply-side structural reform from the central government, which include:

  • 'Emission standard of air pollutants for magnesia refractory industry'

  • ‘Opinions on promoting the sustainable and healthy development of the magnesite industry’

  • 'Measures for Total Control of Magnesite resources (for Trial Implementation)'

  • 'Liaoning Province's magnesite flotation and magnesite industry capacity replacement measures (for trial implementation)'

Market

Chinese magnesia prices were under pressure during the first half of 2020 due to a combination of excess supply and weak demand from the downstream refractory sector, with the latter severely affected by the Covid-19 pandemic worldwide. And while many magnesia producers in China operated at less than 50% capacity or halted production entirely due to the challenging market conditions.


The magnesia production is still more than 23 million tonnes per year in China. To deal with the overcapacity, Liaoning province implemented a ban on the use of explosives that began on July 1, 2020, and all new open-pit mines were banned as well.


Export prices for dead-burned and fused magnesia decreased by about 13% between January to September 2020. Meanwhile, transportation costs maintained downward pressure on prices after the coronavirus pandemic in China.


A producer source in Dalian, China, told us recently, the problem of rising transportation costs still affect the purchasing decision of international buyer, " there is no problem of raw material supply and price so far, but the freight cost is extremely high, he said, most international clients are happy with the FOB price, but cannot take the final charge including transportation cost."


After banning explosives in mining and following the halts at some small-sized producers in Liaoning province, the cheaper materials disappeared, which allowed sellers to insist on higher prices for DBM, FM and CCM in the middle of November 2020. There is not much material available on hand with more companies halting production near the year-end.

Market Players

There is a list of major players in the Liaoning magnesia market, in no particular order.

  1. Liaoning Magnesite Mining Co., Ltd. (more than 48 companies already joined)

  2. Houying Group

  3. Haicheng Magnesite Group Co., Ltd.

  4. Puyang Refractories Group Co.,Ltd (Hereinafter called PRCO Ltd)

  5. Beijing Lier - Parent organization with Luoyang Lier Refractories Co., Ltd.

  6. Ruitai Technology

  7. DASHIQIAO JINLONG REFRACTORIES CO.,LTD

  8. Qinghua Group

  9. Liaoning Jinding Magnesite Group

  10. Huayu Group

China MagTalk Review

The average annual aggregate demand of magnesite in China is reducing, the estimated demand will reduce to about 2.10 million tonnes in 2025, and 1.90 million tonnes in 2030. This is because of the fallen demand from downstream industries. However, the magnesium alloy material demand may increase due to the needs of the defence sector.


As of the first half of 2020, there are 219 magnesite enterprises above designated size in Anshan city, Liaoning province, China, which take up to 30.9% of the total industrial enterprises above designated size. The total output of the entire magnesite industry was around 9.39 billion yuan (RMB), a decrease of 24.4%.


While, during the same period, there are 586 magnesia firms in Yingkou city, Liaoning province, China, but only 184 enterprises above designated size. In 2019, the total industrial output value was around 24 billion yuan (RMB), a decrease of 7.9% compared with last year. It makes a profit of 1.15bn yuan, down 29.8%. The total production of magnesia materials was 4.048 million tons, a decrease of 6.8% in Yingkou city.


Shandong province and Xinjiang are also the second and third large proportion of magnesite reserves in China, the identified deposit is around 3.64 and 1.36 billion tonnes separately, and coupled with the improving geological work in the western region, Xinjiang will be the backup plan of magnesite resources in the future.


Although the very limited provision of explosives is still applied to magnesite mining in 2021, along with the policy changes in Liaoning province, mechanical mining is continued. Most mining companies would like to stock enough inventory for self-use before putting them on sale.


In addition, during the first half of 2021, magnesia material supply remained stable and the domestic market is not as oversupplied as it once was. Most producers can return back to work after replaced equipment and comply with the environmental standards.


Regular governmental inspections are the new norm. However, due to the Covid-19 still spread in some cities combined with reducing demand from downstream, the magnesia prices didn't see any significant improvement.


Plans to consolidate the Chinese magnesia industry will continue in 2021 with the Liaoning provincial government planning to implement annual production quotas to ensure greater control on total output. Liaoning province would form just two or three magnesite mining groups with integration carried out at county and district levels, and newly-built magnesite mines must reach a minimum mining scale of 300,000 tpy. The industry consolidation will strictly control the increase in magnesite mines and magnesia capacity.


The magnesia upstream industry will do more work to accelerate the speed of green mining. Maximises utility of magnesite resources and improve R&D of new application or materials. Meanwhile, enhance the recycling utility of refractory products if it's possible.


For the midstream industry, smart manufacturing and sustainable transformation is the major task, and at the same time, the high-quality and non-refractory products will be encouraged, such as Magnesium chemical materials, magnesium building materials and magnesium alloy materials.


For the downstream, the high temperature manufacturing industries are going down the servitization route, a digital transformation that enables them to provide services and solutions that supplement their traditional products offering.


Please follow the oncoming event up - The 9th China Liaoning (Dashiqiao, Yingkou) International Magnesia Materials Exposition (CLIMME), 23 September 2021.



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