India's manganese ore imports fall 27% in FY23. What to expect in short term?

• Demand for manganese alloys falls, pulls down ore imports
  
  
• Logistics issues hit South African supplies last fiscal
  
  
• Ore demand may remain muted in short term
  
  

Morning Brief: India's imports of manganese ore fell 27% in financial year 2022-23 (FY23) to 4.63 million tonnes (mnt) compared to 6.33 mnt recorded in the preceding year (FY22), as per data maintained with SteelMint.

Imports from the key countries-South Africa, Gabon, Australia and Brazil - fell y-o-y.

Factors that pulled down manganese ore imports last fiscal

Low demand for manganese alloys globally: A pronounced downtrend in manganese ore demand can be attributed to the general lack of demand for manganese alloys in both domestic and international markets because finished steel consumption remained subdued. As a result, importers were less keen to buy in bulk.

In fact, India's imports of manganese ore fell over 27% to 4.63 mnt in FY23 against 6.55 mnt in FY22 for the same reason.

Thus, imported manganese ore prices, CNF east coast of India, saw their peak of $5.36/dry metric tonne unit (dmtu) in April 2022. Thereafter, these started falling. Levels touched $5.07/dmtu in July, falling further to $4.18/dmtu levels over September-November, 2022. A recovery was seen in February 2023 at $4.66/dmtu but from March the prices started declining again.

Power tariffs head north, raise cost of production: Power tariffs were revised upwards in the Durgapur, Vizag and Raipur regions in FY23, these three being the hub of silico manganese production in India. This raised the cost of production of silico manganese (which is currently hovering at around INR 74,000-76,000/t) by INR 4,000-5,000/tonne, leading to lower capacity utilization by the smelters who were already facing a dull exports scenario on a monthly basis. This factor also led to low buying of imported manganese ore in India.

Drop in Indian steel exports, domestic demand: India's steel exports plunged a steep 52% to 9.02 million tonnes (mnt) in FY23 against 18.78 mnt in FY22. That apart, domestic demand was also moderate. This led to inventory pile-ups and the resultant planned maintenance shutdowns ahead of schedules. In such a sluggish scenario, demand for manganese alloys from mills also fell, which, in turn, led to lesser demand for the raw material - manganese ore.

Imports from South Africa drop y-o-y: Supply from South Africa, which is the largest supplier to India, enjoying 55% of the total, was majorly hampered last fiscal. Volumes fell 26% in FY23 to 2.54 mnt compared to 3.41 mnt in FY22. A strike at national logistics behemoth Transnet led to supply disruptions of the material.

Plus, Eskom, the South African utility which supplies power to 50% of the producers, faced challenges in the form of escalated thermal coal prices in an offshoot of the Russia-Ukraine war. This led to lower generation last year and curbed power supply to the ore producers, impacting production.

Leading suppliers in FY23

Imports from South Africa fall 26%: South Africa continued to remain the largest exporter of manganese ore to India. Volumes decreased to 2.54 mnt in FY23 against 3.41 mnt in FY22. However, imports surged 132% m-o-m to 0.332 mnt in March 2023 against 0.139 mnt in February 2023.

South African manganese ore was offered at around $4.66/dmtu for March shipment, up by $0.16/dmtu (4%) from February. Prices were decreased by miners to attract the buyers in a bearish market.

Gabon exports fall 28%: Gabonese manganese ore imports decreased by 28% to 1.42 mnt in FY23 against 1.97 mnt in FY22. A decrease in export demand for high-grade silico manganese led to decrease in the prices of Gabonese ore price, but the material was offered at around $6.15/dmtu for March shipment, up $0.72/dmtu (13%) m-o-m.

Brazil's exports down 17%: Brazil's exports of the material to India fell 17% to 0.100 mnt in FY23 against 0.120 mnt in FY22.

Zambia exports down 56%: India's imports from Zambia were sharply down by 56% to 0.01 mnt in FY23 comparison to 0.030mnt in FY22.

Outlook

Manganese ore prices have been showing a downtrend since February especially since global steel prices have been falling. Prices of other raw materials like iron ore and coking coal have also not been supportive. Thus, demand for and prices of imported manganese ore may stay muted in the short term.