Manganese flake rallies on virus fears; Europe traders seize momentum

A mixture of fears over supply disruptions amid the Wuhan coronavirus outbreak and low stocks in Rotterdam are giving European traders enough leverage to increase their offers substantially, which has already an effect on prices.

Fastmarkets’ manganese 99.7% electrolytic manganese flake, in-whs Rotterdam price assessment rose to $1,725-1,800 per tonne on January 29, up by 3.7% from $1,680- 1,720 per tonne on January 24.

By the time of publication, the highest offer heard in Rotterdam was at $1,860 per tonne. This offer was not yet accepted when the prices was assessed, however, but most market participants expect to reach that level due to the fallout from the virus keeping prices firm for the foreseeable future.

“Today is impossible to buy below $1,800 per tonne in Rotterdam. I had several inquiries this week and I’m rising my offers finding no resistance at all,” a European trader said. “I could see the metal surging above $2,000 per tonne in following days,” he added.

One of the reasons why manganese flake has been the first minor metal to react to fears on logistical restrictions is because European consumers rely solely on China. China accounts for over 97% of total manganese flake production worldwide, with around 130 manganese flake producers with a total capacity of around 4,200 tonnes per day.

Production across China had already wound down for the Lunar New Year holiday, making it hard to distinguish between a seasonal business slump and any more serious disruptions the virus might be causing.

“If China closes their ports it will be like a force majeure, no one knows what will happen, we bought material but will this be shipped?” the same European trader said. “Everything is sourced from China and any further delay will create a shortage. There is little production in Western Africa, but this is peanuts in comparison with China.”

The material tightness in Rotterdam is another supportive factor that was already arising before the Lunar New Year. In fact, prices have been on the way up since the start of the year, albeit at a slower pace.

Fastmarkets’ manganese 99.7% electrolytic manganese flake, in-whs Rotterdam price assessment started the year at $1,570-1,620 per tonne on January 1 and has increased over the month, with European consumers needing to restock after postponing deliveries amid a gloomy market picture in 2019. Slow demand from steelmakers combined with low prices last year forced consumers to keep stocks at a minimum.

“Consumers were running as late as possible, they were postponing their orders for the fourth quarter of 2019 to the first quarter of 2020 and, as a result, there is little material on the ground,” a second trader said.

“Manganese was quite thin already and nothing will be shipped until mid-March, which is a big gap. We’ll see prices rising rapidly”, a third trader in Europe said.

Other traders contacted by Fastmarkets downplayed the effects the coronavirus outbreak would have on supply and kept a more cautious position.

“The increase is just psychological and some people want to make money based on that. Whoever wants to offer material $400 higher than a week ago, I wish them good luck, no one is that desperate to pay that,” a fourth trader said.

“This is hysteria and it’s an attempt from some Western traders to push prices up,” the second trader said. “Europeans saw a window of opportunity but I don’t see any real changes in supply,” he added.

Beyond fundamentals, sources agree that the momentum will depend on the duration of the impasse. The New Year holiday break in China has been extended by three days until Sunday February 2, while Shanghai has announced that all non-essential enterprises will be closed till February 9.

For the time being, other than Wuhan port, all other Chinese ports remain open.

“This is a short-term uptick that will last until February 9 when the Chinese are back,” the second trader said. “In the meantime, we have some material on the ground and are deciding when will be the right time to sell it,” he concluded.

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