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Magnesia next in line in China

As Chinese authorities continue the clampdown on polluting industries to clean up local operations, the focus is shifting to magnesia processors. After the rapid downfall in magnesia prices out of China following the scrapping of the quota system, some suggest the downtrend may be reversed if the shutdowns lead to a supply shortage.

China is proceeding at full steam in its programme to rid the country of highly-polluting and obsolete industrial practices in a bid to improve the environmental footprint of its operations with the focus of local authorities now shifting towards magnesia.

Anshan and Haicheng have been the first two cities in Liaoning to be inspected. In Ashan, some 64 companies are due to receive a visit by the environmental task forces over the next several months. Those that are found in breach of regulations face hefty fines or temporary shutdowns to their plants.
In Haicheng, where all local magnesia processors have been checked by now, there are 95 companies operating 1,700 magnesia kilns in the city. Of these, 142 kilns were shut in January as a result of the inspections.

The government needs industrial operations to be run on natural gas, rather than coal in order to cut pollution levels. Many facilities found to be still operating with coal as their primary energy source have been forced to close.

In Xinmi city, in Henan province, the municipal government said in December that 85 local refractory factories were shut during 2016. Over the past two years, a total of 2,300 highly-polluting coal down-draft kilns were dismantled in the district.

Reverse effect on prices
In the case of magnesia, the consequences of enforcing environmental policies may also come to affect market supply and prices – potentially reversing the downtrend seen since January, according to market participants. This led to prices for most magnesia products – caustic calcined (CCM), dead burned (DBM) and fused magnesia (FM) – out of China to decrease sharply and, in some cases, chaotically.

While CCM 90-92% MgO FOB China fell by $40/tonne, CCM 94% dropped by as much as $180/tonne, and CCM 96% by around $200/tonne, to mention only a few grades.
Market participants elsewhere have been watching closely the developments taking place in China – which accounts for about half of global magnesia supply.                                                                                                                   
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