Chinese portside manganese ore prices surge following South Africa’s lockdown extension

Chinese domestic portside manganese ore prices of both high and low grades registered significant increases in the latest assessments on Friday April 17, after the country’s ore traders raised offer prices notably in response to a 14-day extension of the lockdown in South Africa.

On April 9, South African President Cyril Ramaphosa announced he would extend the nationwide lockdown in place since March 26 to the end of April as part of efforts to slow the spread of the Covid-19 pandemic.

The extended nationwide shutdown in the African country reignited fears of limited availability of low-grade manganese ore in China during May and June.

As a result, ore traders with stocks at hand either refrained from offering in anticipation of higher prices in the coming days or raised their offers significantly, according to market participants.

Fastmarkets’ manganese ore port index, base 37% Mn, range 35-39%, fot Tianjin, China was 50.70 yuan ($7.17) per dry metric tonne unit (dmtu) (equivalent to $6.19 per dmtu, excluding value-added tax and port handling fees) on Friday. This was up by 3.80 yuan per dmtu week on week.

The corresponding high-grade manganese ore port index, base 44% Mn, range 42-48%, fot Tianjin, China was 54.50 yuan per dmtu (equivalent to $6.64 per dmtu, excluding VAT and port handling fees) on the same day, up by 4.70 yuan per dmtu week on week. 

“We had expected the lockdown to be extended, because there were some signs indicating that. But before the official news came out, some still felt there might be the other possibility – the ending of the original 21-day lockdown on time,” a Chinese market participant said. “Now it provides a perfect reason for traders to adjust their offers up.”

Alloy smelters hesitant to restock
Despite much higher offers prevailing in the market last week, the overall number of transactions was not high because some alloy smelters were not ready to accept high prices amid a lower-than-expected tender price for April-delivery silico-manganese from Hebei Steel, the second largest steel mill in China.

“The highest offer [for high-grade ore] we heard is at around 60 yuan per dmtu – it’s rare to hear a deal for that material concluded above 55 yuan per dmtu. Alloy smelters were resistant to high prices,” a Chinese ore trader said.

“There were a number of inquiries, but alloy smelters were quite cautious about placing orders. Or even if they decide to restock, the volume is not large at all,” a second Chinese ore trader said.

Uncertainty over whether Hebei Steel will raise its tender price for May-delivery silico-manganese and by how much also discouraged alloy smelters from replenishing their stocks, according to market sources.

“It remains unclear at the moment that whether the rise in tender price [for May-delivery silico-manganese from Hebei Steel] will satisfy alloy smelters, though many are expecting to see an increase amid rising spot and futures prices,” a second Chinese market participant said.

Fastmarkets assessed the price of silico-manganese, 65% Mn min, max 17% Si, in-whs China at 6,700-6,800 yuan per tonne on April 17, up by 5.1% from 6,350-6,500 yuan per tonne in the previous week. 

Meanwhile, the most-traded September silico-manganese contract on the Zhengzhou Commodity Exchange closed at 7,234 yuan per tonne on April 17, up by 3.2% from 7,008 yuan per tonne on April 10.

In addition, some alloy smelters have suffered losses due to growing ore prices against the lower-than-expected alloy prices, and this has made smelters wary of restocking raw materials or consider suspending operations.

“We bought only a small volume of ore. We have already been suffering losses, so it’s necessary to be cautious about ore restocking,” a Chinese alloy smelter said on Friday.

“We heard that some had suspended ore restocking and would cease production after depleting their stocks at plants. We will possibly do the same later,” a second Chinese alloy smelter said.