TEX reported that the stably maintained seven month old manganese ore prices came to the end. The fall in the prices this time implies turbulence in the ore prices ahead in 2012 under the softened market of manganese group ferroalloys and development in progress of the big manganese mining project in Kalahari, South Africa with scheduled start up in 2012-13.
In such a sense, it is a concern of the market whether the big price drop, made known late last week, of the ore for the shipments to China in January 2012 would mean an opening of a turbulent year for the ore. As a matter fact, the buyers and users in China were not at all satisfied with the unchanged December prices and the market took it as a matter of time before the ore prices would fall.
The fall, which had been thought, by the most of the market players, rather small like more or less USD 0.50 per dmtu, was much bigger, i.e. down by 13.7 to 20.4%, in other words, by USD 0.75 per dmtu for the most commonly traded grade (Mn: 46%) and by USD 0.90 per dmtu for the metallurgical grade (Mn: 48%, fine).
More details of the price change were as follows, medium grade lumps (Mn: 46%): down to USD 4.75 per dmtu by 13.7%, low grade lumps (Mn: 38 - 40%): down to USD 4.10 per dmtu by 14.6%, and metallurgical (high) grade: down to USD 4.30 per dmtu by 20.4%. This year manganese ore prices fell twice, for March shipments and for May shipments. Since June the prices have been kept unchanged.
Even with the drop, the uncertainties over the market have not totally gone away. Firstly, the prices of manganese group ferroalloys, such as the Indian silicomanganese and Korean high carbon ferromanganese, are forecasted to fall further, as both countries have excessive production capacities casting downward pressure over the price to dip into below USD 1,000 per tonne in the near future. The producers are said to be already operating unprofitably at the current prices, i.e. USD 1,050 per tonne for the silicomanganese and USD 1,100 per tonne for the ferromanganese, so pressure from the producers will continue over the ore prices to go even lower.
Secondly, the port stocks in China of the ore stands currently at some 3.7 million tonnes, which definitely have forced the cargo owners dealers to accept large reevaluation loss in the books from the price drop this time and to accelerate worsening of their cash positions.
The lowest in the ore prices in the recent years was USD 3.50 per dmtu for the medium grade lump (Mn: 44%) as recorded in July and August of 2009. At that time the prices recovered fairly quickly from the low level to USD 5.80 per dmtu, then to USD 6.00 per dmtu and then to USD 6.50 per dmtu towards the year of 2010. Actually the USD 3.50 per dmtu level was the breakeven point for most of the mines and therefore it was understood by the market as a kind of bottom of the ore prices.
The new prices are still far away from the commonly understood level of the bottom of USD 3.50 per dmtu, and there could be some room for further drops. It is fair to say that some more time is needed before the market of ores gets stabilized as the output cut by the Chinese ferroalloy producers started only recently. Under the good news of the credit control easing since last week in China, buying interests in iron scraps and iron ores came back, but market views that it will take some more time for the ferroalloys to regain appetite from users. It is noteworthy whether the easing would do anything good for the ferroalloys.
(Sourced from TEX Report Limited)
