QSLM purportedly terminated its magnesium metal supply contract after Magontec declined an agreement amendment request.

Following discussions from 2012 to 2014, Qinghai Salt Lake Magnesium (QSLM) and Magontec entered into several binding agreements linked to developing and constructing magnesium metal and alloy facilities at QSLM’s Golmud premisses. Under the agreement, Magontec completed a magnesium alloy cast house that has been operational since 2018. Despite this, several setbacks to QSLM’s plans have derailed the timeline for magnesium metal production, including the restructuring of QSLM’s parent company after its financial collapse in 2019. QSLM has since struggled to bring the project online, with even more reported delays potentially pushing its start-up beyond 2024.  

Contract amendments proposed by QSLM detail changes to the offtake price metric, along with the removal of production exclusivity and key termination clauses. In response to Magontec’s rejection of the proposed amendments, QSLM terminated the contract on 23 July 2024. Magontec has subsequently sought legal advice and is preparing its new magnesium alloy strategy to present to shareholders. 

China currently dominates magnesium metal production and has significantly increased its capacity over the last two decades. Other large-scale projects currently under development will further increase Chinese capacity by more than 400ktpy, placing the market into a supply surplus over the next decade. Given that die-casting is forecast to be the largest demand growth application, Magontec’s cast house has the potential to play an important role in the magnesium alloy supply chain, where a forecast surplus in supply will allow ample alternative magnesium metal sources.