China's efforts to reduce air pollution by curbing coal production have seen
prices for Chinese magnesium bound for the Japanese market rise about 10% from its mid-January low. The metal is currently trading between $2,380-$2,410 per ton, including freight costs.
The drop in output by magnesium’s major producer follows a decision by Chinese government authorities to reduce production of coal, the primary energy source for magnesium production.
Chinese authorities sent environmental inspection teams to 18 cities, including Beijing, starting in mid-February. Coal plants violating environmental regulations were ordered to suspend production, which resulted in a decline of magnesium production and an increase in magnesium prices. Some exporters have reported difficulty securing inventory.
The National People's Congress, whose latest session ended on March 5, adopted a policy to reduce the country's annual coal production capacity by at least 150 million tons this year. A consensus market view is that the government will continue to tighten environmental regulations for some time.
Japan-bound magnesium "could rise to the $2,400-$2,550 range from now to April," said Takashi Kamishima, president of Tokyo trader Tak Trading.
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