Latrobe Magnesium Ltd (ASX:LMG) could have a major impact in North, Central and South America, as well as the Caribbean after upgrading its exclusive distribution agreement with Metal Exchange Corporation (MEC) to sell most of its magnesium into these markets.
LMG will benefit from an "excellent" price, coupled with growing consumption in these regions. The price benefit is due to a US anti-dumping duty payable on magnesium imports from China.
The US anti-dumping duty on imported China magnesium means that the USA magnesium price is frequently twice the FOB China magnesium price, mainly due to the anti-dumping duty placed on most imports from China of 141.49%.
LMG has had a relationship with MEC since 2019 when it first signed its initial sales agreement. The upgrade of this agreement follows LMG’s current expansion plans to its demonstration plant and expanded 10,000+ tonnes per annum capacity.
The agreement now includes:
- updated dates;
- a minimum firm commitment of 8,000 tonnes per annum of magnesium;
- a minimum initial term with a rolling annual renewal; and
- a minimum floor price for the purchase of the magnesium.
MEC has wide reach
Headquartered in St Louis and founded in 1974, Missouri Metal Exchange Corporation has become one of the premier aluminium and magnesium manufacturers.
It has seen impressive growth over almost 50 years, growing from a regional aluminium scrap company to a global corporation with international offices in Switzerland and China.
MEC has six manufacturing plants in the US, employs more than 900 people and supplies aluminium and magnesium under short- and long-term agreements.
Breaking into the Americas
This is a substantial agreement for LMG, given the size of the markets.
North and Central America consume 160,000+ tonnes of magnesium per annum, which is projected to increase with greater use of magnesium by the motor vehicle industry.
Currently, there is only one magnesium producer in the USA, which is undergoing a capital refurbishment and has been mostly out of commission since 2021.
This means most of the magnesium is imported, but with exports from China banned for a period in September 2021, USA magnesium users have been searching for alternative magnesium suppliers with some turning away from primary high-grade magnesium and toward lower-grade magnesium and recycling.
The good news for LMG is under the US-Australia free trade agreement, magnesium produced in Australia is exempt from any import duty.
LMG proposes to sell up to 80% of its production from the Latrobe Valley in Victoria into the Americas.