(SMM) -- The price of manganese in China has risen slightly due to curtailed production of the metal. Power shortages and environmental safety are the two biggest factors behind the reduced production. The price of the manganese flake has risen from $3,300 to $3,350 per tonne. While the increase in price is small, gains made by other metals used primarily in steel production, such as molybdenum, are a promising sign that steel production will remain strong with China driving the demand.
Manganese Investing News spoke with Larry Reaugh, CEO of American Manganese Inc. (CVE:AMY) about the factors at play in the manganese market.
Over the course of the summer electricity has been in short supply in China. Industries with high electrical consumption have been forced to cut back production as the country struggles with generation.
"Right now is a quiet period in China, but they have been shutting down production in a lot of the provinces for environmental safety and because of electricity rationing," stated Reaugh, adding, "I don't think you will see it impact the price until the end of September into October."
Many analysts have forecast that manganese and other steel alloy metals should make gains as production resumes after the normally slow summer season. Coupled with the reduced supply of manganese Reaugh forecasted, "We should see the price moving upwards, because there simply will not be as much manganese as there has been previously on the market."
Demand for steel worldwide is set to grow on the year. Analysts are mixed on exactly how much growth will be realized in 2011; however, all agree that the BRIC countries will lead the way.
"We expect steel demand to grow worldwide by 8 percent worldwide, most of that growth will come from China," stated Reaugh.
This forecast is in line with the sentiment from some of the world's largest steel companies. For example Tata Steel (BOM:500470), India's largest steel producer, stated that demand for the year would rise 9 percent globally. Steel demand will continue to be strong in the BRIC countries due to strong economic growth as well as the urbanization of the countries.
OM Holdings shakeup
Of note in the manganese market is the recent commotions taking place at OM Holdings (ASX:OMH). Ukrainian billionaire and owner of Consolidated Minerals (ConsMin), holds an 11.35 percent stake in OM, has been vocal about his desire to remove OM's Chairman Low Ngee Tong and Director Tan Peng Chin.
"These directors appear to exert a level of influence and dominance over the board, whose erratic and inconsistent decisions have led to a massive destruction of shareholder value," ConsMin owner Gennadiy Bogolyubov said.
The two executives in question have not been shy to fire back. OM Holding recently stated "the 11.35 percent shareholder was partly responsible for its weak share price because it had created additional uncertainties," reported Kate Emery, for The West Australian.
ConsMin is hoping to replace the executives with two ‘independent' directors, investment banker Malcolm McComas and former NSW Liberal leader Peter Debnam. Action is expected to be take on September 1.