SHANGHAI, Mar. 19 (SMM) --

Supply

Operating rates at China's EMM producers are around 78%. Although operating rates at large EMM producers remain unchanged, operating rates at EMM producers with capacity between 5-10kt/yr are as high as 78%. Supply of EMM is indeed slightly oversupply and sluggish transactions of EMM result in significant increase of inventories at producers. However, current mainstream costs at EMM producers are between RMB 14,500-15,000/mt, and prices of electricity power, ore powder and sulfuric acid will not have room to fall in the near term. High costs will still lend strong support for EMM prices.

Demand

Demand of EMM is weak in general. Stainless steel: Since situation in stainless steel mills are sluggish, purchases from stainless steel mills haven't increased when EMM prices are at low levels, and stainless steel mills will make purchase on as an-need basis in the following week. Steel mills: Demand for steel mills is relatively depressing, and inventories are high at steel mill. Some steel mills even cease to purchase ferromanganese alloys this month. In this context, purchasing of EMM from steel mills will also decline accordingly. Alloy producers: China's domestic ferromanganese prices continue to fluctuate weakly, and trading sentiment is moderate. In addition, power cut expanded in a wider area due to drought in Yunnan, Guizhou and Guangxi provinces, and 80% producers shut production in Guizhou province, 50% producers shut production in Guangxi province and 70% producers suspended production in Yunnan province. Low operating rates will result in weak demand of EMM. Export market: inquiries increased and exporting volumes show signs to grow, but it still takes time for the recovery of export market.

Summary

Downstream demand hasn't improved but supply of EMM was relatively ample. EMM price may fall between RMB 14,500-14,600/mt due to high inventory pressure, and prices may gradually move up when downstream purchasers increase purchasing volumes when prices fall. It is expected that EMM prices will move in the RMB 14,500-15,000/mt range in the following week.

To contact the writer on this report: jianghanmei@smm.cn

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