The most influential factor for manganese ore prices is the Chinese appetite. In addition, the impact from the international manganese group ferroalloy market including Japan is also un negligible.
The prices of manganese ores quoted by BHP Billiton for China have been in a continuous downtrend for 16 months since June or July 2010 when the price for the fine ore (Mn: 43%) was USD 8.35 per dry metric tonne unit. The price of the fine ore for December 2011 was USD 5.10 per dry metric tonne unit, down about 40% from the peak as seen mid 2010. This drop in the ore prices can be interpreted as an eventual adjustment in accordance with the drop in the prices of manganese group ferroalloys in the world market during the 16 month period.
Like the price for iron ores, of which price setting system was changed from annual pricing to monthly pricing in order to timely reflect market changes to the applicable price for each month, manganese ore pricing was changed to on monthly basis, also as initiated by the major manganese ore suppliers. Therefore, the price has been unavoidably destined to fluctuate in a short term and the producers of the ferroalloys have been exposed to such fluctuation, which caused unstable management and operation by the producers.
Manganese ore supply is in a sense under oligopoly by 4 suppliers, namely, BHP Billiton, Vale, Assmang and Eramet, but they apparently failed to maintain the price at the higher level, considering the weak market of the manganese group ferroalloys.
Imports of manganese ores by China in 2011 were about 13.0 million tonnes, the record high and up by 12% from 11.6 million tons in 2010. China's imports of the ores were mainly (77% of the imports to China) from the world's three major sources i.e. Australia, South Africa and Gabon. Especially the share of the supplies from Australia in the imports during 2011 sharply rose to 35%, up from 25.7% in 2010.
The theory of competition has been unexceptionally applied to the market even under the situation in which a majority of manganese ore production in the world is by the three major sources as above, and the ore prices for China, as set by BHP Billiton have been moving coupled with the price movement of the manganese group ferroalloys. Nevertheless, the major suppliers have fiercely competed with each other in such a huge, by far the biggest market in the world.
The imported quantity of the ore to China in 2011 was a record high, but at the same time the portside stocks in China rose to 3.75 million tons in total in December, a record high level and up by about 9% from 3.42 million tons, the 2010 year end stock. This high level of stock, equivalent to China's imports for 3 months, serves as kind of spot supply sources (as so called buffer stocks) for immediate need, although this kind of phenomenon of keeping such a huge stock is not seen in other countries. In China, there are many merchants of imported ores, so called the speculators, who are always willing to gamble on position taking for lucrative sales from time to time.
The fact that, despite the continued long downtrend of the ore prices, the ore stock in China reached the record high level means, some market sources assume, that some major overseas ore suppliers had already exported sizable quantities of the ores to China for stock accumulation under only provisional pricing upon customs clearance, so that the ore suppliers could quickly meet any immediate needs from Chinese consumers of potentially strong appetite. This assumption is in a sense understandable because the current stock level is somewhat too high for the mere speculators to, financially saying for example, handle and manage properly. If such a big quantity of that kind is already accumulated in the current stocks, it must be one of the reasons why the major big suppliers of ore find it not easy to keep control over the ore prices.
(Sourced from TEX Report Limited)
