India's manganese ore imports rise slightly in CY'23 on higher steel output, price viability

• Higher crude steel production pushes up demand for manganese ore
  
  
• Buyers prefer imported material due to quality benefits
  
  
• Imports likely to remain supported as alloys prices may edge up
  
  

Morning Brief: India's manganese ore imports rose marginally by 4% y-o-y to 5.35 million tonnes (mnt) in calendar year 2023 (CY'23) compared to 5.14 mnt recorded in CY'22, as per data maintained with BigMint. South Africa emerged as the largest supplier with 3.2 mnt followed by Gabon (1.7 mnt) and Australia (0.31 mnt).

Steep tariff

However, imports to Visakhapatnam port fell from 2.82 mnt in CY'22 to 2.77 mnt in CY'23 due to high power tariffs. Notably, many mills in Vizag had to cut or stop production amid high power tariffs.

In fact, industry insiders informed that higher electricity tariffs in the region affected production volumes, with Vizag accounting for 35-40% of silico manganese production in India. Power tariffs in this region rose to INR 8.2 per unit until end-Nov'23 when the state govt. announced reduction in tariffs by INR 1.68/unit. The raised power tariffs earlier in the year 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.

As a result, manganese ore imports volumes were affected. In contrast, imports to Syama Prasad Mookerjee Port, Kolkata, rose from 2.12 mnt in CY'22 to 2.41 mnt in CY'23. On a monthly basis, imports dropped 16% to 0.52 mnt in December 2023 as against 0.62 mnt in November.

Why manganese ore imports edged up?

Crude steel production rises 11%:India's crude steel production increased by 11% y-o-y in CY'23 to 137 mnt. Industry insiders informed that production rose on account of the demand pull from domestic end-user industries. Since manganese is essential to iron and steel production by virtue of its sulfur-fixing, deoxidising, and alloying properties, the robust momentum in crude steel production naturally boosted demand for manganese ore. Indian mills preferred to import more, as a result due to quality specifications.

Imported ore prices fall: Indian mills seized the opportunity to import more manganese ore during the period under review because prices fell to a three-and-a-half year low in September 2023. For instance, South African Mn37% prices fell by 20% to an average of $143/t CNF India compared to $179/t in the corresponding period last year. This price viability encouraged stocking up of bulk inventories by Indian alloys producers.

Price viability for port-based players: Another significant reason behind the rise in imports was price viability for port-based players for imported ore. Prices for imported manganese ore (37%, South Africa-origin) ranged between $136-$138/t (INR 11,300-11,500/t) CNF India. Domestic miners' prices for Mn37% grade hovered at around INR 11,800-12,200/t exw ($142-$146/t) in September- October 2023. In addition, a host of quality benefits that can be derived from imported ore pushed up demand.

Price trends

Monthly average prices of manganese ore have fallen steeply. For instance, prices of Mn 37% lumps imported from South Africa fell to a three-year low of $3.78/dmtu in July 2023, similar to levels of $3.83/dmtu recorded in December 2019.

On the other hand, Mn 44% lumps of Gabonese origin were at over six-month lows. The price in July was at $4.64/dmtu, similar to $4.63/dmtu seen in November 2022, while Australian lumps (Mn46%) prices were also at over six-month lows at $4.99/dmtu. Similar levels had last been recorded in October 2022 ($4.92/dmtu).

Thus, manufacturers of manganese alloys believe that prices have bottomed out and may start to increase in the near term. Hence, they have increased production two-fold in anticipation of the future rise in ferro alloy prices.

Outlook

Manganese alloys producers and suppliers anticipate an uptick in demand, with alloy prices likely to edge up soon. The supply-demand dynamics in silico manganese is also crucial since it will have a direct impact on demand of ore and import volumes.