In October, benchmark 44% Mn ore lump prices dropped by around 50 cents/dmtu to $2.50/dmtu, CIF China. Although pressure had been mounting for some time, and prices had already slipped slightly in September, this step change, which was led by the major miners, was a big move. The intensity of the fall was surprising and many market participants felt that the adjustment was more than was necessary.
Fundamentals signified that lower prices would emerge - supply reaction, to prices at the previous level around $3/dmtu for 44% Mn lump, has been negligible and the cumulative supply overhang has been mounting over recent quarters. Some non-core producing countries have cut exports; however, volumes from these locations are overall insignificant to the global market. Data suggests that displacement of Chinese domestic manganese ore production has started to pick-up pace; however, in the absence of real data, apparent calculations are likely to overestimate the trend. Based on our knowledge of other industries in China, it is more likely that some of these tonnes have been stockpiled rather than fully displaced from the market by imports.
Given expectation for a continuing weak supply/demand balance, in September we expected that prices would soften further before the end of the year. However, pressure from buyers has not been as strong as the price decline suggests and ore prices at $2.50/dmtu will in fact not provide any significant relief to consumers because ferroalloy prices are already reflecting lower ore costs, particularly in India and China.