One factor encouraging oversupply in the manganese ore market, and driving expectations for further weakness, is currency depreciation. When prices dropped to $3/dmtu in May, the price also reached a new low in local currency terms for the biggest exporting countries, namely South Africa, Australia and Brazil. However, by September, the stable US Dollar price was providing better revenue for some major miners in local currency terms. Without any incentive to reduce output, the market remained highly competitive and the US Dollar price was expected to fall to reflect the currency devaluation as lower costs were passed onto buyers.
Given its strong influence on supply around the middle of the cost curve, the sharp depreciation of the South African Rand is particularly in focus. We calculate that in order for the depreciation of the South African Rand during June-Sept to be accounted for, the US Dollar ore price would have fallen to $2.70/dmtu in October. At this price level, South African miners would receive the same value for a tonne of ore in local currency in October as they did in May. Thus, we conclude that the change in manganese ore price to $2.50/dmtu in October went beyond reflecting the depreciation of the South African Rand. Furthermore, accounting for the Australian Dollar would require even less of a fall in US Dollar price and together these exporting countries account for approximately 60% of seaborne manganese ore.
Source: http://www.crugroup.com/