Following a period of consecutive monthly declines, China’s manganese ore port stocks increased to 5.96m tonnes in December, owing to a slowdown in consumption. This increase is despite production cutbacks by major suppliers and should be taken as a signal to the market to scale back production even further.
Following a period of consecutive monthly declines, China’s manganese ore port stocks increased to 5.96m tonnes in December, owing to a slowdown in consumption. This increase is despite production cutbacks by major suppliers and should be taken as a signal to the market to scale back production even further.
To this end, it is estimated that mainstream ore supply will be reduced by 60% to 2.72m tonnes in 2016. Major producers including Asia Minerals Limited (AML) and United Manganese of Kalahari (UMK) have cut production by 50%, while South32 has delayed restarting its project, which was scheduled for recommissioning in January 2016.
With respect to ore prices, prices rebounded slightly in January owing to a period of restocking ahead of the Chinese Spring Festival in February. However, this was short-lived and the majority of ore majors either left offer prices unchanged or reduced prices further for January delivery.
South African 37% lump was being offered at RMB16.5-17/dmtu ($2.57-2.65/dmtu) , compared with RMB16-16.5/dmtu ($2.5-2.57/dmtu) at the end of December. Gabon 45% material showed the most resilience, being offered at RMB16-16.5/dmtu (2.5-2.57/dmtu), representing a month-on-month increase of RMB0.5/dmtu ($0.079/dmtu). It is worth noting that these prices are below that offered in November and are likely to fall back in February, as demand slows over the Chinese festivities.
China’s steel capacity remains the biggest impediment to any kind of recovery. It is estimated that China’s excess capacity stands at around 435m tonnes. As such Europe is now opposing China’s potential market economy status, which if passed, will prevent industrialised economies from instituting anti-dumping charges or protectionist measures against China.
The Chinese Iron and Steel Association, (CISA), predicts that output from China will fall by a mere 25m tonnes over 2016, which will hardly put a dent in the excess supply situation. As such, offshore markets will continue to encounter headwinds as exports from China continue.
SOurce:mineweb.com