Dongxing: The concentration of the magnesium industry continues to increase, and supply and demand may enter a sustained tight balance state.

Dongxing released a research report stating that China's magnesium reserves account for 70% of the world's total, with a production ratio of 92%. The industry's structural reform on the supply side has led to a rapid concentration of market share, and it is expected that by 2025, the market share of leading companies will exceed 30%. With the development of industrial clusters and the resonance of new energy demand, the global supply and demand for primary magnesium may enter a state of tight balance. The bank believes that between 2025 and 2027, the global supply and demand gap for primary magnesium may be 0.1/0.9/-0.1 tons, and the tight balance of global primary magnesium supply also indicates that the magnesium industry has shown cyclical bottoming characteristics. Key points from Dongxing: - Magnesium is an alkaline earth metal in group IIA of the periodic table, silver-white in color and ductile. - Magnesium is light in weight, with a relative atomic mass of 24.305, a relative density of 1.74g/cm3, a melting point of 648.8C, and a boiling point of 1107C. Magnesium is an active metal, relatively stable in dry air, but reacts with water when heated, and can react with most non-metals such as halogens, nitrogen, and sulfur. It dissolves in acid to release hydrogen gas and exhibits strong reduction properties. Magnesium is widely distributed in the Earth's crust, accounting for 2.1% of the crust's mass, ranking eighth among all elements in the crust. Magnesium has active chemical properties and exists in nature only in the form of compounds. Among the known 1500 minerals, there are over 200 magnesium compounds, accounting for over 12%. - China has abundant magnesium resources with high endowment. - - China's magnesium resources available for mining and smelting are mainly distributed in dolomite, magnesite, and salt lake resources. According to the State Council Development Research Center statistics (2024), China's magnesium reserves account for 70% of the global total. In terms of dolomite, according to USGS statistics, the global dolomite reserves in 2024 were 7.7 billion tons, with a high concentration, CR3 reaching 54%. Among them, Russia (2.3 billion tons, accounting for 30%), Slovakia (1.2 billion tons, accounting for 15%), and China (0.68 billion tons, accounting for 9%) are the top three dolomite reserve countries globally. In terms of magnesite, the global magnesite reserves are mainly distributed in countries such as China, Italy, Spain, and Turkey. Among them, China's magnesite resources exceed 20 billion tons, accounting for over 80% of the global total. In terms of salt lake resources, the magnesium salt reserves in Chinese salt lake brines reach 48 billion tons, including magnesium sulfate reserves of approximately 16 billion tons and magnesium chloride reserves of approximately 32 billion tons. - The global primary magnesium supply is subject to significant single-market risks.- From the perspective of upstream dolomite production, according to USGS statistics, the total global dolomite production in 2024 was 22 million tons, remaining flat compared to 2023; with China's dolomite production at 13 million tons, flat compared to 2023, accounting for 59% of global dolomite production. Global primary magnesium output is even more concentrated: according to statistics from the China Nonferrous Metals Industry Association, the global primary magnesium production in 2024 was 1.12 million tons, a year-on-year increase of 12%; with China's primary magnesium production increasing by 24.73% to 1.0248 million tons, pushing China's global output share of primary magnesium from 82% in 2023 to 92% in 2024. In addition, according to USGS statistics, from 2019 to 2024, China's magnesium ingot production accounted for an annual average of 89% of global magnesium ingot production, and by 2024, this figure had increased to 95%. - The industry's structural reform on the supply side is advancing, leading to an increase in the concentration of China's magnesium industry.In 2021, the concentration of China's primary magnesium industry was low, with a CR3 of around 14% and a CR10 of around 32%. There are 13 top primary magnesium smelting and production enterprises with production exceeding 30,000 tons, with a total market share of 35.9%. In recent years, due to the continuous tightening of environmental policies, small magnesium enterprises have struggled to meet energy consumption, production capacity, and other requirements. The industry's structural reform on the supply side has been pushed forward, outdated magnesium production capacity has been gradually phased out, and the industry's concentration has increased significantly. From the perspective of top enterprises, Baowu Magnesium Technology's primary magnesium production capacity market share increased from 7.4% in 2023 to 20.5% in 2024, and according to its expansion plans, this figure may further increase to 32% by the end of 2025. - Environmental and industrial policies impact China's magnesium resource supply status.From the perspective of China's magnesium industry policies, the strict regulation of the magnesium mining industry mainly focuses on resource extraction permits, export controls, and environmental protection. Firstly, companies need to go through a complex approval process and pay mining rights fees and usage fees to obtain mining rights, which increases the entry barriers for mining companies. Secondly, China also implements certain controls on magnesium ore exports to ensure the stability of domestic supply and prices. In terms of environmental policies, magnesium mining companies must meet higher environmental standards in the extraction and smelting processes, meaning companies not only need to invest a significant amount of money in building and upgrading environmental protection facilities but also need to introduce advanced environmental protection techniques and management experiences. Environmental departments are becoming stricter in approving and regulating magnesium mining projects, and companies that do not meet environmental requirements will not be approved or will be ordered to shut down for rectification. Environmental and industrial policies place higher demands on magnesium producers, limiting magnesium supply in China and globally. - China's primary magnesium industry has gradually formed a new modern magnesium industry cluster, with scale effects improving or optimizing corporate profitability.- In 2024, Yulin City, Shaanxi Province issued the "Several Policy Measures to Support the Development of Magnesite Carbon and Metallic Magnesium Industries", the Development and Reform Commission of Anhui Province released the "Several Measures to Promote the High-Quality Development of Magnesium-Based New Materials Industry", and regions such as Xinjiang Uygur Autonomous Region and Hebi City, Henan Province also issued different industry policies to guide and support the construction of primary magnesium and magnesium alloy smelting backbone enterprises of different scales, thereby creating a new modern magnesium industry cluster. The establishment of industrial clusters expands the scale benefits of magnesium production, reduces the production cost of primary magnesium, and enhances the profitability of enterprises. - The utilization rate of global magnesium industry capacity is expected to increase, and the industry scale may enter a trend of benign expansion.The development of the magnesium industry cluster is conducive to the improvement of industry scale efficiency and the restoration of profitability levels, which also means that the industry's development will form an effective resonance with the development of the new energy industry. Considering magnesium metal as a core production factor for the development of green and new quality productivity industries, the continued expansion of green, intelligent, mobile, and lightweight applications at the product application end will drive the effective downstream demand for the magnesium industry.Expansion, this helps to change the current situation of low industry capacity utilization and further improve the industry's scale into a benign expansion trend. From the perspective of industry supply and demand balance, considering the existing construction plans and capacity utilization of original magnesium production capacity on the enterprise side, the bank believes that between 2024-2027, global original magnesium production may increase from 1.12 million tons to 2 million tons, with China's original magnesium production increasing from 1.026 million tons to 1.75 million tons. Combining the bank's discussion and forecast on magnesium demand, the bank believes that between 2025-2027, the global original magnesium supply-demand gap may be 0.1/0.9/-0.1 tons, and the tight balance of global original magnesium supply also implies that the magnesium industry has shown cyclic bottm characteristics.Risk warning: Magnesium supply growth exceeds expectations, downstream demand industries develop below expectations, global new energy vehicle production growth is below expectations, global liquidity tightens beyond expectations, interest rates rise sharply beyond expectations, regional conflicts escalate and spread.