On the supply side, current inventories at the Chinese ports of Tianjin and Qinzhou are around 2.0-2.1 million tonnes, according to Metal Bulletin’s assessment on March 21. This is a level which is considered to be on the low side.
In March 2017, however, manganese inventory levels were around 3.0-3.1 million tonnes, which is considered typical.
“Current inventory levels are at a record low - very low compared with other years,” Tshipi chief financial officer Carel Malan said.
“Manganese importing volumes into China are now not sufficient to support the volumes required by smelters. Steel mills expect more material to arrive now,” the general manager of Shanghai Qunxian International Trade, Edward Li, said. This is a move that will provide further support to prices.
Meanwhile, steel mills, the biggest consumers of manganese alloys, are at their seasonal peak as far as demand for manganese alloys is concerned.
“Construction, which accounts for the majority of steel consumption in China, is not likely to slow down any time soon,” MENGFA Ferroalloys vice chairman Jennifer Bao said. “Moreover, there are some new furnaces in steel mills that are targeting May and June to start operations, and that will increase the demand for manganese.”
Metal Bulletin’s 37% manganese ore index, fob Port Elizabeth, was assessed at $7.52 per dry metric tonne unit (dmtu) on March 16, the first drop since February 23.
Meanwhile, Metal Bulletin’s 44% and 37% indices, cif Tianjin, rose by $0.15 to $8.78 per dmtu and by $0.01 to $8.21 per dmtu respectively on March 16.
Despite the refusal of Chinese manganese alloy smelters to buy material at prices higher than $8 per dmtu, they will need to buy manganese ore eventually, according to a Shanghai-based trader.
Manganese alloy smelters typically only have about one month’s supply of manganese ore on hand, and procurement was slow in February due to the Chinese new year celebrations, so they will need to accept the current price, he added.
The general consensus during the panel discussion was that, although current high prices for manganese ore might slow down procurement on the smelter side, deals will still be made.
“The market might correct itself soon, but at the current price, because it is not likely to go down in April, which is a popular month for manganese ore restocking,” Jian Zhou, a China market research analyst for the International Manganese Institute (IMnI), said.
“Everyone is being cautious now because the price is too high and they want to take a wait-and-see stance on a potential market recalibration,” Bao said, “but it looks like the price should reflect the current demand and supply situation.”
Buying from Chinese manganese smelters might slow down but strong market fundamentals will support manganese prices, participants said during a panel discussion at the Asian Ferro-Alloys Conference in Hong Kong on Wednesday March 21.