FOCUS: Market participants expect poor manganese ore outlook for rest of 2019

Manganese ore market participants in China expect a poor outlook for manganese ore prices for the remainder of 2019, amid steady supply growth and lagging demand.

Fastmarkets’ manganese ore index 37% Mn, cif Tianjin declined to $5.02 per dry metric tonne unit (dmtu) on August 23, the lowest level since Fastmarkets began the assessments in February 2018.

This was down from $5.47 per dmtu on July 5, the first assessment in the month, and from $6.11 per dmtu in early 2019.

Meanwhile, Fastmarkets’ manganese ore index 44% Mn, cif Tianjin dropped to $5.63 per dmtu on August 23, the lowest level since May 2017, marking falls from $5.64 per dmtu in early July and $6.81 per dmtu in early 2019 respectively.

“We do not think the market will exhibit a good performance in the second half. It’s likely that supply outpacing demand will drag ore prices downward. The price may bounce back a bit after hitting a bottom but cannot escape the general downtrend,” a trader in China told Fastmarkets.

Another market source told Fastmarkets they expected the lowest price for 44% manganese ore in the second half of the year to be $5.55 per dmtu, also predicting that 37% ore prices could sink as low as $4.70 per dmtu.

Supply to increase at a steady pace in H2 2019
Manganese ore supply to China will increase steadily during the rest of the second half, given that no miners are understood to be planning to reduce production, yet lower alloy production is anticipated, market participants said.

A number of manganese alloy producers outside China have curtailed production amid rising costs and subdued alloy prices, Fastmarkets has reported. 

European producer Ferroglobe cut production in November 2018, just nine months after buying two alloy plants from trader-miner Glencore.

Australian miner South32 reported 223,000 tonnes of manganese alloy production in the year to June 2019, down from 244,000 tonnes in the corresponding period of 2018 and has put its alloy assets under review.

“Reduced alloy output means more available ore. Since China is the world’s largest consumer of manganese ore, it’s possible that the increased ore would be shipped to China,” a Chinese market participant said. 

Manganese ore exports from South Africa climbed by about 8% year-on-year to 8.97 million tonnes in the first six months of 2019. Of the total exports in the first half, 81% went to China, India and Malaysia, with China’s share representing more than 67%.

Over January-June 2019, Chinese imports of manganese ore totaled 15.7 million tonnes, up from around 12.3 million tonnes in the corresponding period of 2018, according to official but unconfirmed data seen by Fastmarkets.

Some market participants expect an increase of around 10% year-on-year in the supply of manganese ore in 2019 based on the production ramp-up plans of some ore miners and the expected total imports into China in the year.

“Many ore miners were heard to have ramped up their production so far this year, stimulated by favourable ore prices,” a second Chinese market participant said.

Moreover, a few market participants expressed their concerns to Fastmarkets over the negative effect of excessive supply on the market.

“The market is fairly balanced at the moment and I do think any additional material could definitely lead to an oversupply,” a manganese ore supplier said.

Uncertain demand amid production restrictions in H2
Many Chinese alloy smelters and traders have been increasingly cautious about securing cargoes for the second half of the year, citing uncertainties about demand for alloy products as a result of the expected production restrictions among Chinese steel mills for the rest of the year.

Some Chinese mills, especially those in northern China, are expected to restrict production in either late September or early October when Beijing is celebrating the 70th anniversary of the founding of the People’s Republic of China.

Any official notice about when and how many mills will be ordered to restrict production is yet to be announced and it remains unclear how severe this round of production constraints will be.

“Though the official announcements have not come out yet, it is common practice for the central government to initiate a round of restrictions on production among northern mills for a bluer sky during the 70th anniversary celebrations,” a third Chinese market participant said.

Other Chinese market participants are expecting slower demand for alloys in the second half of the year due to the traditional winter production curtailments over November 15, 2019-March 15, 2020.

One market participant predicted growth of around 8% year-on-year in crude steel output in the second half on expectations of slower growth over the period.

China produced a total of 577 million tonnes of crude steel in the first seven months of 2019, a year-on-year rise of 9%, compared with a year-on-year increase of 9.9% in the first six months, according to data from the country’s National Bureau of Statistics.