SHANGHAI, Aug 3 (SMM) - The manganese ore prices fluctuated downwards in July, and the SiMn alloy prices were also affected by the decline in raw material prices and the weak demand. How will the market perform in August? SMM will analyse the SiMn alloy and manganese ore price moves from both the supply and demand.
Manganese ore
From the perspective of supply: the manganese ore inventory rose as a whole in July, an increase of 507,000 mt month-on-month. The main reason is that the Gabon ore arrived at ports in large amounts, while downstream alloy factories were more cautious in purchasing, hence the overall inventory accumulated.
On the demand side: the spot prices of manganese alloy were dragged on by poor demand from steel mills as they have not yet shown signs of recovery, resulting in less demand for alloy, and manganese ore subsequently. In addition, as manganese ore prices kept falling in July, downstream alloy factories kept only 1-2 days of raw materials in order not to stock high-priced raw materials, despite risks of raw material shortage.
In terms of prices: the ore prices have been falling continuously throughout July, and the originally resilient Australia lump prices dropped as well. The monthly average price of Australia lump remained at 57 yuan/mtu, down 8% MoM; Gabon ore 54 yuan/mtu, down 7% MoM; and South Africa semi-carbonate ore 39 yuan/mtu, a MoM increase of 9%. Due to the continuous arrival of Australia lump at ports and the long-term reduction in the proportion of Australia lump used by alloy factories, the prices were under pressure amid rising inventory. Two large ships carrying Gabon ore also arrived in China in July, shoring up the supply. And the ore prices fell when the alloy factory were cautious in purchasing.
For the market outlook, SMM believes that the ore prices may drop slightly first and then stop falling. First of all, the miners are in seriously losses, and are less willing to lower the prices further after selling with low prices throughout July. Another drop of 1-2 yuan/mt can be expected, and then the wrestling between different forces will intensify. On the other hand, with the sharp drop in raw material prices, the profits of downstream manganese alloys have been restored. Some factories that are still profitable may resume the production, and the demand for manganese ore will pick up slightly.
SiMn alloy
In terms of raw materials: coke prices continued to decline in July. As of the end of the month, the prices of secondary metallurgical coke remained at around 2,000 yuan/mt, which means that there is room for a decrease of 500 yuan/mt concerning SiMn alloy cost. In addition, manganese ore prices fell as well, reducing the cost of SiMn alloy.
On the demand side: Affected by the sluggish terminal consumption, downstream steel mills were slow in resuming the production, resulting in poor SiMn alloy demand, with some alloy sold below 7,000 yuan/mt. In this case, a number of high-cost alloy factories reduced or stopped the production, especially in south China.
In terms of prices: the prices of SiMn alloy dropped in July, so was the futures. In the spot market, as of the end of the month, the price difference between the north and south markets was narrow, which mostly stood at 7,100-7,200 yuan/mt (in cash, ex-factory). The alloy factories, on the other hand, reduced the production to the level enough to supply the orders on hand, and the spot transactions were limited. Affected by the falling futures prices, the discounts were below 7,000 yuan/mt over the futures prices, and the factories were generally pessimistic.
In the future, SMM believes that the situation of weak market consumption will extend. The season is that the steel mills resume the production more slowly than expected, and the market shall watch the purchases of SiMn alloy by the mills in August. If the steel mills’ purchases fall short, the restored profits of alloy factories will be engulfed by the steel mills again. And alloy factories will maintain production cuts by then, resulting in a stalemate in the SiMn alloy market.
