India's manganese ore imports up 15% in CY'24. Caution the buzzword in short term?

Morning Brief: India's manganese ore imports rose a moderate 15% to 6.22 million tonnes (mnt) in calendar 2024 (CY'24) compared to 5.40 mnt recorded in 2023. On a m-o-m basis, volumes were up 21% to 0.51 in December 2024 mnt against 0.42 mnt in November.

The lower grades saw the highest y-o-y increase. Those below 35% rose a whopping 120% to 1.72 mnt. The 35-below 40% rose a moderate 10% to 2 mnt.

What factors boosted imports in 2024?

Higher crude steel output keeps ore demand bolstered: India's crude steel production rose a nominal 5% in 2024 to 148 mnt against 141 mnt seen in the preceding year. Although the uptick was not much, it kept the demand for manganese alloys on the higher side. Through the year, mills were plagued by dull demand, steel imports at highly competitive prices and fluctuations in domestic offers. The year began on a note of slack demand that forced mills to opt for maintenance shutdowns in the initial period. But soon pre-election restocking kicked in which led to some increase in steel off-take.

Increase in manganese alloys capacities: India's manganese alloys production capacities increased on the back of the higher crude steel output. For instance, all the three production hubs saw y-o-y increases. Raigarh saw an additional 50 mva, Raipur, 30 mva and Durgapur furnaces topped up with 20 mva. The current installed capacity is around 5 mnt.

Increase in exports of manganese alloys: India's manganese alloys exports increased y-o-y in 2024. For instance, ferro manganese exports rose around 16% to 0.72 mnt last calendar from 0.62 mnt in 2023. Silico manganese exports remained range-bound y-o-y at 1.11 mnt. The top four importing geographies were the UAE (0.20 mnt), Italy (0.19 mnt), Egypt (0.14 mnt) and Turkiye (0.12 mnt). The spurt in exports was on account of panic buying from these geographies amid rising manganese ore prices. Overseas buyers wanted to stock up on manganese alloys, apprehending that the rising ore prices would have a cascading effect on the former. Prices of manganese ore, especially over May-July, 2024, hit four-year highs and alloys touched 2-year highs, vindicating the panic buying stand.

Panic buying by Indian smelters: Indian smelters also engaged in panic buying of ore, resulting in substantial bulk bookings from May to August 2024. The panic buying happened amid an 8% q-o-q decline in South32's manganese ore production to 1.175 wmnt in Jan-Mar'24. Australian manganese ore output fell 18% to 0.645 wmnt as furnaces there temporarily suspended operations due to the impact of tropical cyclone Megan. However, South African manganese ore output increased 10% to around 0.530 wmnt on improved mining performance.

High-grade manganese ore prices, especially of Mn37%, hovered at around $6.25/dmtu, in June 2024. Imported grades, delivered at port, were at around $231/t (INR 19,193) CNF India. In contrast, even though MOIL, a key manganese ore producer in India, offered at INR 17,437/t ($209/t) ex-mines for the same 37% Mn grade in May 2024, these were still lower compared to the imported ore.

India requires around 8 mnt of manganese ore annually while domestic production touches around 3.5 mnt at best. Thus, the deficit has to be plugged by imported ore.

Imported manganese ore volumes are expected to remain stable or experience a slight decline in the near term due to the current market uncertainty and production cuts in manganese alloys in key regions. Domestic smelters, after panic buying in ore, are holding ample inventories at present. Thus, they can exercise prudence in terms of ore booings in the near-to-medium term. This cautious stance will effectively manage their supply needs while navigating unpredictable market conditions.