SMM Manganese Ore Price Forecast (Apr. 22-26, 2013)

SHANGHAI, Apr. 22 (SMM) –

Review:
Spot manganese ore prices at Chinese ports remained essentially unchanged last week. Operating rates at manganese alloy producers did not increase despite the onset of rainy season. Instead, SMEs cut or even suspended production, eating into demand for manganese ore. More manganese ore will arrive at major Chinese ports this week, which will weigh down manganese ore prices. Many manganese alloy producers will replenish stocks for the upcoming Chinese Labor Day. However, SMM believes restocking downstream will have only marginal effect in lifting spot manganese ore prices.   

Prices:  
In the Port of Tianjin, the mainstream traded price for Australian manganese ore (Mn48%, lump) was RMB 47-47.5/mtu; RMB 39-39.5/mtu for South African mixed carbonate manganese ore (Mn38%, lump), and RMB 39.5/mtu for South African high-iron manganese ore (Mn35-36%, Fe18%). In Southern ports, the mainstream traded price for Australian manganese ore (Mn48%, lump) was RMB 45.5/mtu; RMB 38.5/mtu for South African high-iron manganese ore (Mn35-36%, Fe20%); RMB 39/mtu for South African mixed carbonate manganese ore (Mn38%, lump), and RMB 45.5/mtu for Australian high-silicon manganese ore (Mn36%, Si20%).

Inventories:
Inventories at Chinese ports were 2.3 million mt last week, with 950,000 mt in the Port of Tianjin, down 50,000 mt on a weekly basis, and 750,000 mt in the Port of Qinzhou, also down 30,000 mt from the previous week. More South African mixed carbonate manganese ore will arrive from this week on till mid-May, and this will further aggravate oversupply pressure.

Steel Markets:
According to China Iron and Steel Association, China’s average daily crude steel output is expected to hit a record-high of 2.12 million mt in early April. High output, combined with slowly falling finished steel inventories and no turnaround in downstream demand, are putting downward pressure on steel prices. Market players believe steel prices will fall if steel mills do not cut production. Finished steel demand was sluggish in traditionally peak-demand season. There is little chance positive policies will emerge in May. Even if favorable policies are introduced, it will take time to implement them. Besides, the upcoming summer is slack season for steel. Therefore, steel market should remain weak in the first half of this year.      

Overseas Markets:
Vale produced 501,000 mt of manages ore in Q1 this year, with Azul accounting for 76% at 381,000 mt, and Urucum contributing 19.5% at 98,000 mt. Output at Urucum grew 5.9% MoM and 46.8% YoY. This is due largely to higher production efficiency from use of new equipments. Azul’s output, in contrast, tumbled 27.2% MoM, and was up a meager 0.4% YoY, because of limited handling capacity of its plants. Mining giant BHP Billiton produced 2.01 million mt of manganese ore in Q1 2013, with 859,000 mt from South African mine site and 1.15 million mt from Australian mine site. The company announced it will reshuffle its management structure, effective July 1.

Forecast:
Weak manganese ore prices and thin transaction volumes are continuing to dampen sentiment. Coupled with a lack of growth in finished steel demand, spot manganese ore prices at ports are expected to edge down RMB 0.5/mtu this week.