Rare metal prices fall on weak automotive demand in China

International prices for rare metals used in automobile production, including magnesium and lithium, are plummeting, reflecting weak demand in China.

The export price of Chinese magnesium to Japan fell to around US$2,950 per tonne at the end of March, the lowest price since May 2021 and 75% lower than the all-time high of around US$12k seen in September 2021.

The price recently rebounded to around $3,100 but is still 45% below last April’s.

The material is indispensable for reducing the weight of cars, and its price is influenced by trends in Chinese car production.

The country’s auto industry has been hit hard by the economic slowdown and supply chain disruptions caused by the COVID-19 pandemic.

According to the Chinese Association of Automobile Manufacturers, the number of new vehicles produced in January and February decreased by 14.5% compared to the previous year. In addition, electric vehicle sales also slowed after the end of government subsidies in late 2022.

As Chinese producers continue to produce magnesium in anticipation of an economic recovery, “the country’s inventories are likely to increase further from the 100,000 tonnes recorded at the end of 2022,” said Takashi Kamishima, president of Japanese non-ferrous metals trader Tak Trading.

Concerns about falling demand for electric vehicles, which use a large amount of aluminum in their structure, are also weighing on prices. The government did not move to reinstate electric vehicle sales subsidies at its National People’s Congress in March.

In March, the market was also influenced by news that real estate giant China Evergrande’s new energy vehicle unit could suspend production due to a lack of resources.

Prices for rare metals used in EV batteries have also fallen, with lithium falling for 47 consecutive trading days since the end of January.

Steel additive prices have risen since last fall based on increased demand for pipelines in China and Europe.

“The mood in the market deteriorated after the National People’s Congress failed to announce a large-scale economic package,” said an official at Advanced Material Japan, a rare metals trading company.

China has set a real economic growth target of around 5% for 2023. But there is little optimism, with Premier Li Qiang acknowledging that much work would be needed to reach that target.

Source: Valor Econômico

To read the original news report, check: https://valor.globo.com/mundo/noticia/2023/04/06/preos-globais-de-metais-raros-caem-com-fraca-demanda-por-automveis-na-china.ghtml

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