India's manganese ore imports drop marginally y-o-y in H1; energy prices may cause worry

• Power disruptions in Chhattisgarh drag down ore demand
  
  
• Higher electricity tariffs hit Vizag region alloys output
  
  
• Globally cheaper manganese alloys available
  
  

Morning Brief: India's manganese ore imports dropped marginally by 3% in the first six months (April-September) of financial year 2023-24 (H1 FY24) to 2.61 million tonnes (mnt) compared to 2.70 mnt recorded in the same period of last fiscal, reveals data maintained with SteelMint. On a m-o-m basis, volumes in September 2023 fell by a sharp 23% to 0.36 mnt against 0.47 mnt in August 2023.

Factors dragging down manganese ore imports

Power disruptions in Chhattisgarh: It may be noted that manganese alloy production was down for the last 2-3 months because of power supply disruptions in Chhattisgarh due to maintenance of few power grids in the region. Lack of seamless power supply affected production schedules. During such disruptions, manufacturing facilities often need to either scale down their operations or temporarily halt production until the power supply is restored. Since manganese alloy production requires high electricity usage, operations were hampered. This resulted in reduced output and potentially affected availability and prices of manganese alloys in the market. In a cascading effect, manganese ore demand fell.

Vizag's higher electricity tariffs impact SiMn output: Industry insiders further said that it was Vizag's higher electricity tariffs which most affected production volumes, as this hub accounts for 35-40% of silico manganese (SiMn) production in India. Power tariffs in this region rose to INR 7.90 per unit in H1 against INR 6.5 per unit seen till March this year. The raised power tariffs increased the cost of production and led to output fall of 15-20%, since many small units had to shut down. As a result, manganese ore imports volumes were reduced.

Globally cheaper materials available: Another important reason for reduction in imports of manganese ore was that European buyers turned towards procuring silico manganese from sellers in Rotterdam and Malaysia because of price viability. Average Rotterdam prices in H1 were at $850/t while Malaysian offers hovered at a similar $830-850/t. Offers from Indian sellers, on the other hand, were at $920/t for the high grade 65-16. Rotterdam sellers were able to offer cheaper because of the stockpiles at port while Malaysian power tariffs were way lower than India's at INR 2/t in rupee parity.

But Indian producers of the high-grade silico manganese, of which 10-15% is exported to Europe, were not so lucky because they had to grapple with raised cost of production thanks to the higher power tariffs. However, European buyers refused the higher quotes, leading to inventory pile-up and a consequent cut-back in production of high grade silico manganese.

Decline in Australian manganese ore imports: Close on the heels of the reduction in high-grade manganese alloys production in the Vizag hub, imports of its raw material, the high-grade Australian manganese ore (Mn 46%), registered a 66% decline. As already mentioned, lack of overseas demand, driven by the reluctance of European buyers to accept higher offers, led producers to cut back production.

However, it may be noted, the decrease in imports of the Australian-grade, was balanced out by an increase in South African and Gabonese manganese ore imports (14.5% and 2% rise y-o-y), which helped to keep the overall import levels almost stable in H1.

Price trends

Prices of imported manganese ore have been declining since February this year on account of falling manganese alloys production in India and China. Prices of Mn37% lumps from South Africa edged up to $3.75/tonne in September from $3.7/t in July. But, average prices in April-September, 2023 were at $3.89/t against $4.9/t in the same period in 2022.

Outlook

Given the decline in the price of manganese alloys and current inventory levels, imports of manganese ore are unlikely to alter much even in the event of a price decline.

In the foreseeable future, however, demand for manganese alloys will be significantly impacted if energy prices start rising again against the backdrop of present geo-political tensions. Even though manganese ore prices may remain stable in future, consumption may not see a sharp uptrend because global steel demand is rather subdued at present, except possibly in India.