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US ferro-manganese suppliers have ramped up imports from alternative sources as traditional suppliers have shifted focus to selling manganese ore to China at the expense of alloy production in recent years.
As more manganese ore volumes head to China from suppliers in South Africa and Australia that historically sold high-carbon alloy to the US, importers and traders have had to rely on non-traditional sources, particularly in Asia, to cover volumes required by US steel mills.
Initially, this translated to a downward trend in alloy prices beginning in 2018 as market participants found new suppliers in the form of lower cost producers in Malaysia and Russia, and to a lesser extent India and South Korea.
With the surge in freight costs throughout 2021 and the recovery of steel demand following the early stages of the Covid-19 pandemic, US suppliers were forced to compete with a less globally available alloy supply spread thin across a handful of lower-capacity nontraditional suppliers.
South Africa has increasingly exported a greater share of its manganese ore production to China since 2017, as higher electricity costs and an unreliable power infrastructure has made exporting ore a more viable option to local beneficiation. Over the first nine months of 2021, South Africa exported 9.9mn metric tons (t) to China, compared with 6.2mn t in the same period of 2017.
Electricity is an important input cost in ferro-manganese production, while it is less of a concern for ore miners.
Over a similar period, Australia began exporting more manganese ore abroad as well, particularly to China, and less ferro-manganese to the US. Australia exported 4mn t of ore in the first nine months of 2021, compared with 3.1mn t over the same period in 2017.
In the meantime, suppliers outside of Asia began to cut back ferro-manganese production capacity or idled furnaces altogether.
While US importers had been able to supplement their inventory from Asian suppliers, the US was not originally the primary market for those producers. Additionally, these nontraditional producers were infrequent long-term contract suppliers, where tonnages could be assured to a certain degree, for US mills.
For instance, Indian producers are typically a major international supplier to European, Middle East and Asian markets, but US imports from India increased to 33,386t from 1,930t in the first nine months of 2021 from the same period of 2020. Similarly, Malaysian and South Korean exports are both up by around 30pc separately over the same period, comprising 39pc of total US imports, while they did not even breach 5pc five years prior.
This has contributed heavily to an over doubling of US high-carbon ferro-manganese (Mn 80pc C 6-8pc) prices in the past year to $2,500-2,600/gt, while the price of manganese ore (Mn 44-46pc) delivered to China was only up around 30pc to $5.70-5.85/dmtu over the same period.
US suppliers, brokers, and traders have increasingly been forced to compete internationally for a limited supply of alloy from suppliers that are historically committed to other buyers in other regions. As these US market participants restock alloy on a spot market basis, the costs of transportation and financing are passed on, some of which are typically shared by suppliers in annual contracts.
The spot market nature of these mill purchases drove price indexes higher and resulted in alloy prices decoupling from fundamental input costs, like manganese ore. This has become even more true as ore producers in South Africa and Australia invested more into ore operations rather than high-carbon ferro-manganese.
Source: Argusmetal
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- [Editor:kangmingfei]
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