China's silico manganese prices to fall further on demand-supply mismatch

Chinese silicomanganese (SiMn) prices are expected to hover at low levels for the foreseeable future, the results of Mysteel's latest monthly survey suggest. The fundamentals for the ferroalloy need some time to improve, given expectations for a rise in SiMn output and a slow recovery in demand.

Domestic SiMn output is likely to rise further this month as some smelters in Northwest China's Ningxia have restarted operations to take advantage of decreases in their smelting costs, the report said, while many smelters in North China's Inner Mongolia may also keep their production high to enjoy healthy profit margins.

For May, total SiMn output among the 121 Chinese smelters under Mysteel's tracking reached 914,352 tonnes, up 9,252 tonnes or 1% from the prior month, as reported. The sampled smelters host 94% of China's SiMn smelting capacity.

Chinese SiMn prices remain weak from the surplus in supply. As of June 5, the national price of 6517 SiMn was assessed by Mysteel at Yuan 6,640/tonne ($933/t) including the 13% VAT, falling by Yuan 320/t on month and marking a new low since April 20 2021.

Many market participants are not so confident about the bidding prices tabled by Chinese steelmakers for June deliveries after noting the weakness in spot SiMn prices. "SiMn buying prices among the mills (for June deliveries) may be Yuan 200/t below those in May," a market source in Shanghai predicted.

However, SiMn demand from steel producers is expected to recover gradually, which may help to alleviate the oversupply of the ferroalloy to some extent, according to the report.

Some domestic steel mills have resumed operations in response to reduced losses on finished steel sales, and their crude steel output may move up slightly compared with the average for May, it noted.

Besides, finished steel prices in China have recently shown some signs of bottoming out, which may help improve the sentiment in the domestic SiMn market and lend some support to the prices of this ferroalloy, Mysteel Global learned.

For example, China's national price of HRB400E 20mm dia rebar, a bellwether of domestic steel-market sentiment, was assessed by Mysteel at Yuan 3,808/t including the 13% VAT as of June 5, gaining Yuan 128/t from the recent low recorded on May 31, or up Yuan 6/t on month.

Domestic SiMn prices may also gain some support from the cost side, as manganese ore prices are expected to keep firm this month with the higher import cost of Chinese traders and the limited volumes of ore being delivered to China's major ports.

As of June 5, the price of South Africa-origin 36.5% grade Mn ore at North China's Tianjin port under Mysteel's assessment was at Yuan 31.2/dmtu including the 13% VAT. This was Yuan 0.4/dmtu lower from one month ago, but higher by Yuan 0.2/dmtu compared with the 2.5-year low on May 25.

Although the world's leading miners of manganese ore cut their offering prices for July shipments to China, the decrease was limited. In fact, the depreciation of the Yuan against the US dollar meant that the import cost for Chinese traders rose, Mysteel Global noted.

South32, the world's top manganese ore miner headquartered in Perth, Western Australia, has cut its offering price for 45% grade Australian manganese lump ore for shipments in July to $4.9/dmtu CIF China, down by $0.1/dmtu from the prior month, as reported.

Data from China's State Administration of Foreign Exchange showed that on June 5, the central parity rate of the Chinese currency against the US dollar was Yuan 7.0904=$1 compared with Yuan 6.9114=$1 recorded one month earlier.

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.