Transnet’s Monthly Manganese Transport | Image Source: Reuters
How to manage excessive manganese stocks seems to be an ongoing theme these days. In our last issue we noted that stocks had risen almost 1m tonnes to 3.5m tonnes and this month, while inventory levels have declined, stocks are still pretty high at 3.19m tonnes.
To date, manganese prices have been pretty flat, lending support to both the ferromanganese and silicomanganese markets. But the outlook is quite concerning. It has come to our attention that the reason for the price run at the beginning of the year was due to a single Chinese trader purchasing more than 75% of the manganese ore.
This strategy was in an effort to take advantage of the low environment and raise prices, but this trader has indicated that he is unlikely to repeat this strategy in the near future. As such, while prices are rising on the back of some restocking, we are not seeing prices holding at this level. MOIL has slashed their prices, at a time which is traditionally the restocking period in India, as it is the start of their new Fiscal Year.
In terms of the individual ports, as of the end of March, Tianjin stocks fell to 2.39m tonnes, while Qinzhou stocks were unchanged at 720,200 tonnes. However, an analysis of vessels due in April shows that already over 0.5m tonnes are expected and it is uncertain whether these stocks have all been placed. Typically, what has been happening is that orders come through and Chinese buyers abandon these orders and buy on the stock market. However, we are noting that despite excess stocks, very little of this is high grade material.
Furthermore, as much of this inventory at the report is high cost, it is very difficult to liquidate it as sellers do not necessarily want to realise their losses.
A consideration of steel markets reveals that while China is committed to reducing capacity, there is still the issue that any upward movement in price encourages producers to over-produce. For this reason we noted, despite the fact that more than 65m tonnes of capacity was eliminated, there was an increase in output last year. As such, more and more protectionist measures against China continue to be implemented.