Magnetism can only be observed in a material with atoms that are (mostly) aligned in the same direction. Atoms in liquids are free to move around and as such even if we could make them align the effect would be lost almost instantaniously.
Basicaly, imagine metalic iron like a box full of aples that were tightly stacked so all of them have their stems facing up. Now to imagine liquid iron shake the box of apples really hard. The apples (atoms) are no longer stacked like they were before and the material they represent has lost its magnetic properties.
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