Manganese flake rally heats up on China’s latest round of environmental inspections

Manganese flake prices surged above $2,000 per tonne amid ongoing environmental inspections in China with further production disruptions adding fresh impetus to this year's rally.

“The price rally seems to be heading up. I had bids at $1,950 for prompt in Rotterdam this week. I am not selling at this level anymore though. I’m holding out for above $2,000 now,” a manganese trader told Metal Bulletin.

“The market seems really tight. There are no sellers in the market and everything coming out of China is suggesting higher prices,” a second trader said.

Metal Bulletin assessed the manganese flake in-warehouse Rotterdam price at $1,990-2,050 per tonne on Wednesday January 24, up 3.6% from the previous assessment.

The last time manganese flake prices went above the $2,000-per-tonne level was in June 2017. Prices had been trading steadily for the most part of the second half of 2017, with limited spot activity.

“Smaller producers have stopped operations for environmental checks. There is not a lot of competition on the production side in China and if you have material you can basically offer anything you want and you will still find buyers,” a second trader said.

The world’s largest manganese flake producer – Ningxia Tianyuan – had halted its production at the end of last year amid ongoing environmental inspections in China, prompting the first increase in manganese flake prices, but has since restarted its operations.

“Although Ningxia is back to production, the production is very limited. They still got the order of 10,000 tonnes for January shipment, so far they have only shipped 5,000 tonnes,” a market source in China said.

Ningxia Tianyuan’s production capacity amounts to 800,000 tonnes per year, according to market sources.

“They [Ningxia Tianyuan] cannot offer to others until March. They think the market will be firm in February and prices will keep increasing. Other suppliers cannot offer February shipment either,” the Chinese market source added.

The nationwide campaign against environmental violations has forced some smaller illegally-operated miners, smelters and flotation plants across 30 different Chinese provinces to close since the beginning of last year.

“I understand Ningxia resumed production but they are busy delivering material under old contracts with clients, therefore they have little available for spot market,” a second market source in China said.

“Manganese flake production in Guizhou is also affected by environmental inspections. Manganese ore production in Hunan has reduced due to environmental inspections,” the second source said.

Hunan, Guizhou and Chongqing are China’s major production hubs for manganese flake along with Ningxia province.

Material tightness has also been caused by “speculation from some producers who hold material, to delay sales and expect higher prices,” the second source in China said, adding, “The current market price is around 12,500-12,800 yuan ($1,951.91-1,998.76) per tonne VAT paid. The selling price for export is $2,050 per tonne cif Rotterdam, which is too high for global buyers.”

Prices should remain at these elevated levels until at least the end of the first quarter, according to market participants.

“There are no offers on manganese. I’m giving bids to the Chinese but they want to wait till after the Lunar New Year. I don’t want to wait though because I know prices will be even higher then. The only offers I can get are for March shipment and are still high, which means the market will remain tight till the end of the first quarter,” a third trader said, adding, “I believe in $2,100 [per tonne] within one week.”

Forthcoming national holidays in China will disrupt supply further, and cause markets to start winding down before the end of the month, market participants said. Lunar New Year is on February 16 this year.

Still, the recent rally has some market participants warning of a pullback.

“There is strong resistance on the high prices of manganese flake and lumpy from local steel mills so maybe there will be a small price correction after the Lunar New Year,” the second Chinese source said.

This article was updated on January 25 to reflect that Ningxia Tianyuan’s production capacity amounts to 800,000 tonnes per year.