GLOBAL MANGANESE WRAP: Manganese ore prices surge; alloys supported globally
Strength remained in the global manganese ore and alloy markets last week, with ore prices gaining almost 5% week-on-week.
• Manganese ore prices rise on positive sentiment, while Chinese port stocks continue to fall
• Strong European silico-manganese prices lent support to ferro-manganese
• Market participants predict tightness in US silico-manganese supply following sanctions at major supplier Georgian Manganese
Material of 37% manganese content was trading at $4.59 per dmtu fob Port Elizabeth, the equivalent of $5.16 on a cif Tianjin basis, the Metal Bulletin index showed on Friday May 19. This was up from $4.38 a week earlier.
The 44% index also surged to $5.76 per dmtu cif Tianjin from $5.49 previously.
Offers from South African miners and traders in China rose last week, and with port prices for 44% material far higher than those of seaborne material, some say further gains are likely.
“Sentiment is hot right now. Steel mill purchase prices are expected to be higher, and port prices are above $7 (for 44%),” one miner told Metal Bulletin. Metal Bulletin does not currently publish a spot yuan-based fot index, but fot numbers suggest business taking place at around $7-7.50 fot when converted to a dollar-basis.
“Could the next seaborne be at $7?” the producer source asked.
Other producers attributed the rally to material being in tight hands in China. Some argue that this does not reflect true fundamentals.
“There is absolutely no fundamental reason for it to be this high. Stocks are in the hands of a few guys who took positions when the price was low,” a second producer source said.
Chinese alloy sources expressed concern about the market’s ability to absorb such dramatic ore price hikes.
The 37% index has more than doubled since February, although it is still some way off its December high of $7.42 per dmtu.
Chinese buyers are now split into two camps. One argues that the present price has risen too high to be accepted. They say the alloys market will find it difficult to pass the cost increase to downstream mills.
“As for semi-carbonate ores, I think the current market is too crazy and I won’t buy above $5 [per dmtu cif China]. It’s risky to buy as the cargo will arrive in July. Who knows how the market will be at that time,” a major alloys smelter said.
“The silico-manganese market is not good enough to consume such a high increase of ore prices,” a second smelter said.
The other group of Chinese ore market participants believes that the ore price will continue to rise as overall supply at ports is limited and alloy prices, which strengthened last week, will continue to climb.
Manganese ore inventories at ports in China have continued to fall over the past two weeks, with stocks below 3 million tonnes mid-last week.
“The Chinese alloy market also went up, and now market confidence has increased after hearing major mills now willing to pay 7,200-7,250 yuan [$1,046-1,053 per tonne] to buy silico-manganese,” a major trader said.
Alloy strength in China
Silico-manganese producers and ferro-manganese smelters both raised their offers this week to reflect the higher manganese ore cost as well as their hopes of higher market levels.
Shagang, China’s largest private steel mill, is believed to be planning to set its silico-manganese tender price for June at 7,250 yuan per tonne; much higher than the major mills’ May purchase level of 6,800-6,900 yuan, according to market sources.
On Friday, Metal Bulletin assessed silico-manganese prices in China at 6,700-7,000 yuan per tonne, up 200 yuan from last week. Ferro-manganese prices were assessed at 6,300-6,400 yuan per tonne, compared with 6,200-6,400 yuan on a week before.
“As far as I know, silico-manganese supply is not sufficient in the spot market as there are some production reductions in the southern production areas like Hunan and Guizhou due to the current environmental checks,” the trader source added.
Strong silico-manganese futures prices also boosted market sentiment last week. The most traded September contract on Zhengzhou Commodity Exchange closed the week at 6,810 yuan per tonne on Friday May 19, up from the close of 6,354 yuan a week earlier.
Alloy strengthens elsewhere
Silico-manganese prices also made gains elsewhere in the world.
Indian prices reached $1,060-1,125 per tonne on Friday from $1,040-1,110 per tonne previously, as Indian alloy prices are typically highly sensitive to ore price moves.
European silico-manganese prices hit €1,100-1,125 ($1,233-1,261) per tonne on Friday from €1,080-1,120. At least one large deal was concluded at the upper end of the new range.
“Silico-manganese is quiet but firm,” one seller told Metal Bulletin.
Strength in silico-manganese has also helped support ferro-manganese prices, although with limited spot activity; most assessed prices as stable at €1,200-1,280 per tonne.
“Ferro-manganese is fairly strong. There’s no material from Korea and no need to lower prices. If silico- is trading large volumes at €1,120, ferro- will be well supported,” a supplier said.
Low stocks support US FeMn prices
Ferro-manganese prices have also continued to show resilience in the USA on supply-side tightness.
US spot prices for high-carbon ferro-manganese rose for the second consecutive week to $1,400-1,450 per long ton on May 18, up 1.1% from $1,390-1,430 per long ton previously, according to Metal Bulletin sister publication AMM.
The supply of high-carbon ferro-manganese has been thin, as several traders have been observed in the market seeking material in recent weeks.
“Some small traders have come to us seeking units, and we even saw one of the larger suppliers out looking for additional units,” a supplier source told AMM.
Logistical issues, the result of flooding, have supported prices in some regions, but sources were quick to note that strength remains elsewhere too.
“No doubt that if you are a supplier looking for a couple of trucks to catch up to cover a delivery, you are going to pay a premium right now with the river situation, especially in the Chicago area,” a second supplier source said. “But we are getting prices on the high end of the range in areas that are completely unaffected by the flood related shipping delays. Prices have been stronger no matter where the business is,” he added.
“As we head towards the third quarter, we are starting to see numbers higher than what people were anticipating because of the lack of stocks in the US,” a third supplier source agreed.
Silico-manganese stable in USA
US spot prices for silico-manganese prices remained stable at 65-68 cents per lb on May 18, according to AMM, due to a lack of activity. But market participants said they expected increased activity imminently, as at least one major mill entered the market last week for a large tonnage for its second-half requirements.
While silico-manganese prices were stable, low inventories were also reported in this market, due to concerns related to ore price volatility.
Market participants attributed the low inventory levels for both materials to a lack of replacement options limiting import volumes in the USA. “Where is the US going to get units from? Prices are firm everywhere. There is no one sitting on a ton of available stock that they are eager to sell,” the third supplier source said to AMM.
Volatility in the manganese ore market has been credited for the lack of global supply options. “Non-integrated producers are getting whipped around by ore prices,” a fourth supplier source explained. “Everyone is extremely conservative on purchasing ore, which is creating continued tightness on the alloys.
Market participants indicated that additional supply chain issues may be forthcoming in the silico-manganese market after Georgian Manganese LLC was slapped with harsh sanctions in response to alleged environmental infractions.
Georgian Manganese, a subsidiary of Georgian American Alloys Inc (GAA), is one of the largest sources for US silico-manganese imports and also supplies manganese ore to GAA’s US silico-manganese operations.
“Georgian Manganese represents a very large part of the market here, so if supply is disrupted at all, that would be a big deal for silico-manganese in the US,” the fourth supplier source said.
“The effect on the US would legitimately be very quick…I’m not sure where that gap gets filled,” he added.
US imports of silico-manganese from Georgia have totalled 11,629 tonnes through the first three months of the year, while inflows totalled 72,508 and 84,995 tonnes in 2016 and 2015, respectively.