Fastmarkets calculated its weekly manganese ore index, 44% Mn, cif Tianjin at $4.43 per dmtu on Friday August 4, unchanged on a weekly basis and ending its recent downward trend that started on June 16 at $4.73 per dmtu. The index is down by $1.71 per dmtu from the peak of 2023 at $6.14 per dmtu on February 10.
The lower-grade ore market ticked higher last week, with the spread between higher-grade and semi-carbonated prices narrowing over that time.
Fastmarkets’ weekly calculation for its manganese ore index 37% Mn, cif Tianjin was $3.60 per dmtu on August 4, up by 2 cents over the index on July 28, while it was $1.01 per dmtu lower than the year-to-date peak of $4.59 per dmtu on February 10.
One of the biggest factors contributing to falling prices has been the high supply of ore material, market participants said.
Port inventory falls but supply pressure remains
Manganese ore port inventories in China have been dropping in recent weeks amid increased downstream production rates. Still, they remain high and continue to exert supply pressure, market participants said.
According to Fastmarkets, combined port inventories of manganese ore at Qinzhou and Tianjin ports were 5.67-5.74 million tonnes on Monday, August 7 with a midpoint of 5.70 million tonnes compared with 5.92-6.13 million tonnes a week earlier.
While port inventories have dropped slightly in recent weeks, they have remained above 6 million tonnes at the midpoint for most of the year.
One factor contributing to the recent stock reduction is increased alloy production rates.
“Chinese manganese alloy producers, especially northern ones, are making a profit margin, and they are running at a high-capacity utilization rate,” a Chinese manganese ore trader source said, “Even as manganese ore imports [remain] high, the port inventory does not pile up [further].”
According to China customs data, the country imported a combined 15.38 million tonnes of manganese ore in the first six months of 2023, up by 9.03% from imports in the first half of 2022.
Monthly silicon-manganese production in China is around 930,000-980,000 tonnes, with most of the output from northern producers – these benefit from being located close to Tianjin port where manganese ore is imported.
These northern producers also have the advantage of using cheaper coal-fueled electricity which lessens production cost pressures, according to industry participants.
But manganese ore supply remains lofty. Current port inventories are large enough to support around three months of alloy production, based on the industry standard of 2 tonnes of manganese ore for 1 tonne of silicon-manganese production.
In addition to major traditional suppliers such as Australian, South African and Gabonese manganese ore miners, there are other competitors in the market.
“Brazilian manganese ore shipments to China increase sharply this year, and it adds competition to manganese ore options, especially high-grade ore material,” a second trader source from China told Fastmarkets.
In the second quarter of 2023, China’s imports of Brazilian manganese ore soared.
China still attractive to international miners in H2
In the remaining five months of 2023, there are still positive signals for manganese ore demand in China, which may continue to attract supply, sources said.
“Smelters will keep production rates high because of their profit margins,” a second trader added. “In other words, they need high supply of manganese ore.”
This corroborates Fastmarkets analyst views: “Fastmarkets expects some increase in manganese ore prices on a CIF Tianjin basis in the fourth quarter on the back of higher alloy demand and prices,” Fastmarkets analyst Harry Riley-Gould said.
As well, fresh macroeconomic policies in China – Beijing published these late in July – have improved sentiment due to the potential rise in demand for downstream steel products, which could translate into increased demand for manganese alloy products and manganese ore.
But downside risks remain considerable due to the steady growth of Gabonese supply in recent years, as well as uncertain downstream markets in China, according to Riley-Gould.
“We do not expect a return to price levels of the first quarter of the year in the absence of fresh supply-chain disruptions,” Riley-Gould added.
Volumes of higher-grade ore likely to increase
Miner sources expect supply to grow, particularly for higher-grade material sourced from Gabon, they also told Fastmarkets.
Transported volumes of higher-grade Gabonese ore are likely to increase if producer targets are hit in the latter half of the year.
“There is a lot more expected to come in H2 relative to H1,” an ore trader said.
“High-grade producers will push volumes in the second half of the year, according to their [financial] reports,” a supplier source said.
Major Gabonese high-grade ore supplier Eramet is targeting 7 million tonnes in transported ore volumes this year, according to the company’s 2023 interim financial report published on July 26.
Eramet’s transported ore volumes in the first half were 2.8 million tonnes, down by 27% due to the “suspension in traffic” in January following a landslide in Gabon in December 2022 and a rail derailment in early April, it said.
Therefore, the company plans to ship 4.2 million tonnes of ore in the second half of the year, an increase of 50% from the first half.
Market participants pointed out that manganese ore producers in West Africa and South Africa are frequently hit by logistical issues that can limit volumes.
Yet despite delays in rail and shipping slot allocations in the first half of 2023, South African ore producers have still “managed to move material at decent volumes,” sell-side sources said.
Sources estimated that 1.9 million tonnes of lower-grade material was shipped out of South Africa in June and again in July.
The recent strengthening of the rand against the dollar has led to an increase in trucking costs, which has resulted in a decrease in trucking rates in South Africa, producers said.
Around 600,000 of ore can be transported by truck each month, Fastmarkets understands, but the actual amount is dependent on cost, with trucking a more expensive yet more flexible alternative to rail.
The healthy volumes coming out of South Africa were evident in Jupiter Mines’ Quarterly Activities Report released on July 31.
“Land logistics volumes were in line with expectations for the quarter, with South African rail volumes being higher than planned,” it said.
Jupiter Mines has a 49.9% beneficial interest in Tshipi, the company that operates the Tshipi Manganese Mine in the Kalahari basin in South Africa.
In addition, South32, another major participant in the manganese mining industry and which extracts higher-grade material out of Australia and lower-grade material out of South Africa, said it achieved annual production records in its quarterly June 2023 report released on July 23.
Its manganese production increased by 4% in its 2023 financial year ended on June 30, the company said.
