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After falling in January, ore prices held relatively stable in February and only slight reductions are expected for March.
However, China’s production of manganese alloys has increased sharply since 1Q18, and a weak market post-Spring-Festival has prompted the Ferroalloy Industry Association of China to call for cuts to raw material production.
Port inventory has remained at 3 million tonnes since February 22nd, suggesting that demand is strong enough to control stock levels. Furthermore, the operating rate of alloy producers is still high, and while procurement is on hold, port traders have confidently maintained offers.
High alloy inventories have caused smelters to hold off on ore purchases at current prices, and so we expect some weakness in the market for 2Q19.
With respect to China’s exports of electrolytic manganese to Indonesia to decline in 2019. As of February 13th, Tsingshan now has two manganese production lines in operation each producing 45 tonnes of electrolytic manganese per day, and a third production line is in the pipeline. The Indonesian steel giant is increasingly able to satisfy its own consumption needs and will be less reliant on Chinese exports going forward.
Upstream, the market faces a complex second quarter. Demand is healthy, but oversupply has materialised quickly as a result. Economic, political and structural issues in South Africa, Zimbabwe and Brazil and Ghana have the potential to disrupt supply, although a “perfect storm” scenario is unlikely and so we expect the long term impact to be negligible.
Overall, we expect stable ore prices for March, with the potential for reductions should alloy factories hold off long enough to motivate the port traders.
As of February 27th, the mainstream transaction price at Tianjin Port for South African manganese ore (Mn 36-37%) was RMB50.5-51.5/dmtu. That for Australian manganese ore (Mn46, Fe<5%) was RMB60.5-61/dmtu). The mainstream transaction price at Tianjin Port for Gabon manganese ore (Mn 45% Fe<5%) is at RMB 56.6-57.5/dmtu.
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