India's manganese ore consumption rises 18% y-o-y in FY'24. Know why?

• Domestic crude steel output up 13% y-o-y
  
  
• Manganese alloys capacity expansion fuels ore demand
  
  
• Price factor, quality considerations drive imports
  
  

Morning Brief: India's manganese ore consumption witnessed a significant increase of over 18% y-o-y in financial year 2023-24 (FY'24) reaching 8.85 million tonnes (mnt) compared to 7.48 mnt in FY'23, as per data rustled up by BigMint. The healthy growth in manganese ore consumption signals robust demand in the domestic market.

Factors driving manganese ore demand

Higher crude steel production: India's crude steel production surged 13% y-o-y in FY'24 reaching 143 million tonnes. This growth was fuelled primarily by a 25% y-o-y rise in steel production through the IF route, while the EAF-based mills witnessed production growth of 12% y-o-y, not to mention moderate growth recorded by the primary mills. Growth in steel output naturally boosted demand for manganese alloys much needed in final steel production for churning out grades that meet stringent quality specifications. Our market recce suggests that rise in steel demand in a pre-election year boosted consumption of manganese alloys and ore.

Domestic alloys capacity expansion: Domestic capacity expansion in manganese alloys seems to be propelling demand for ore. As per a recent BigMint study, several prominent smelters in Visakhapatnam operating 30 mva furnaces have expanded their manganese alloys production capacities during FY'24. This has contributed to manganese alloys production capacity rising by 5,000 t per month, which is expected to boost cumulative consumption of manganese ore by 12,500 t on year.

Higher imports despite strong domestic output: Manganese ore imports grew by 18% y-o-y to 5.45 mnt in FY'24.

This is because of attractive prices below $5/dmtu (dry metric tonne per unit) and smelters booked aggressively thereby supporting domestic silico manganese production. It deserves mention that manganese alloys producers, especially exporters, have higher demand for imported material. Y-o-y, exports of manganese alloys, too, reveal a marginal uptick.

Moreover, quality benefits drive manganese ore imports. For example, due to its higher yield compared to domestic material, high-grade Gabonese ore (44% Mn) remains attractively priced, incentivising a shift towards imports for yield optimisation. Imported manganese ore contains around 4% Fe, providing better yield compared to domestic ore, which typically contains up to 2% Fe.

India's manganese ore output is expected to have risen by around 16% y-o-y to 3.4 mnt in FY'24 as against 2.85 in FY'23. Notably, MOIL set a new record in manganese ore production, hitting 1.75 mnt in FY'24 as against 1.3 mnt in FY'23 - its highest ever. Despite higher domestic production, strong imports indicate a firm consumption pattern.

Near-term outlook

In the near term, the upside in manganese ore consumption owing to rising domestic steel production, as well as imports due to depleting high-grade ore inventories, may be tempered by potential dampeners. Y-o-y, steel demand may weaken a bit although infra projects may receive renewed impetus after a new government is sworn in. Broader global uncertainties and weak demand in major steel consumption hubs such as the EU are likely to weigh on manganese alloys export demand, thereby hitting ore demand.

Global mine shutdowns may impact supplies and prices, which are likely to weigh on imports in the near term. However, the market fundamentals remain robust.