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Time To Offer Mn-Ore Price Is Not Foreseeable For Fallen Prices Of Mn Products
= Major Mn Mines, To Offer The Price For Shipments To China In Jan. - Mar. 2009 Quarter
Major manganese mines are delaying to offer their price of manganese ore for China. The price of manganese ore to be shipped to China in January - March quarter of 2009 has to be usually settled with regular consumers of China through mutual negotiations (under yearly contracts with price fixation on quarterly base) in advance of one month before starting its quarter but, in case for shipments in January - March quarter of 2009, it seems that all of the manganese mines have still kept silent.

The background, which the matter to offer price of manganese ore for China is delaying, is due to a sudden and steep deterioration of the economic situation at present. Also, the demand for manganese ore in China has had a considerable decline and, even if price of manganese ore is offered for China, Chinese side is supposed to be difficult to fulfill completely its contracts.

Prices of Chinese manganese ferro-alloys started to fall largely from October of this year and, particularly, price of Chinese silico-manganese has had a sharp fall and its present price has come to be not payable for production cost. Accordingly, Chinese producers of manganese ferro-alloys are currently unable to purchase manganese ore at prices offered by major mines. Namely, in many cases, the price of manganese ore (siliceous ore with Mn 44% at US$16.30 per Mn 1% CIF China) offered from Australian mines for shipments in October - December quarter of 2008 is not workable with Chinese producers as no profit is expected and Chinese side held back to purchase manganese ore for October - December quarter. In consequence of that Chinese producers skipped the contracts, price of manganese ore for China in the quarter has become nominal.

In view of the fact that Chinese side has still held excessive stocks of manganese ore, unless price of manganese ore for shipments to China in January - March quarter of 2009 is reduced to a considerable extent, a possibility to skip again the contracts is supposed to arise. On the other hand, spot price of manganese ore for sales of small lots to be delivered from stocked cargoes (stored mainly at wharves in discharging ports) is US$8 - 9 per Mn 1% FOR The demand for small lots of manganese ore is now being fulfilled by the stocked cargoes as mentioned above in many case and the prices for sales of small lots have come down to nearly half of the price level as targeted by major manganese mines.

China imported 6,646,000 tons of manganese ore in January - October of 2008, having had a considerable increase of approximately 1,600,000 tons compared with that (5,049,000 tons) in the same period of 2007. China imported manganese ore from the four main sources of South Africa, Australia, Gabon and Brazil in the first 10 months of 2008 and the total quantity of manganese ore imported from these four sources into China in the period came to 5,326,000 tons, which shared 80% of the whole import. The matter, having differed from the past cases, is a steep rise of price for manganese ore and, consequently, even such countries as Malaysia, Philippines, Zambia, and so on where had stopped to mine manganese ore for a long period, have revived as suppliers of manganese ore. Namely, the so-called marginal suppliers have come to the front.

The cost to mine manganese ore at these marginal countries is expensive in comparison with that at the four countries as mentioned above and, when price of manganese ore falls to the level of US$5 per Mn 1%, the mining cost at these marginal countries turns to be not payable. Therefore, it is said that they have a strong possibility to disappear from the sources to supply manganese ore. The total quantity of manganese ore to be supplied by these marginal countries is estimated at 800,000 - 1,000,000 tons per annum.

As far as these major manganese mines intend to maintain high prices of manganese ore, China has a possibility to continue their production of silico-manganese on a certain scale by means of importing manganese ore from these marginal countries. However, in view of the fact that China requires to import 5 - 6 million tons per annum of manganese ore, China's reluctancy to purchase manganese ore from major mines is thought to have a limitation.

In order to make a balance on supply and demand of manganese ore, major manganese mines have entered into the structure to reduce their production of manganese ore. At the beginning of December, three major companies of Samancor Manganese (BHP Billiton), Eramet and Vale announced successively to reduce their production of manganese ore. Namely, Samancor Manganese is scheduled to reduce their output of manganese ore in 2009 by 1.5 million tons (their capacity is possible to produce 7 million tons / year) and Eramet plans to reduce the output in 2008 by 250,000 tons (initially scheduled to produce 3.5 million tons in 2008).

Also, OM Holdings, having possessed the Bootu Creek manganese mine located in Northern Territory of Australia, announced in this week to decrease their output of manganese ore in 2009 to 500,000 tons per annum, which will have a decline of 30% compared to that (680,000 tons) in 2008. Furthermore, such three leading producers of manganese ore as Assmang have decided to postpone their shipments of manganese ore for China because of a sudden and steep decline of the demand for manganese ore in China.

This treatment is also supposed to have aimed to maintain prices of manganese ore and, from this point of view, a patience between manganese mines and China will come up. It is estimated that China has held 1,000,000 - 2,000,000 tons of manganese ore as excessive stocks, and Chinese side will not see difficulties to produce manganese ferro-alloys, because the operation rate at Chinese producers of manganese ferro-alloys in October - December quarter of 2008 has fallen to a very low level of 10 - 20% against its capacities.

When price of manganese ore for shipments to China in January - March quarter of 2009 could be compromised, this case is supposed to be due to a recovery of steel production in China. Being stimulated by spot purchases resumed in last week by steel mills, price of Chinese silico-manganese has risen by US$100 per ton but it is still unable to regain a profitability. In case that manganese ore at US$16 per Mn 1% CIF China is used as raw material, the sale of silico-manganese at US$1,350 per metric ton FOB China will result in a loss of US$800 - 900 per ton for producers.

The matter in question is that, being backed by the structure to have become an oligopoly for supply of manganese ore, major manganese mines are successful in the countermeasures to improve supply and demand of manganese ore by means of reducing their production or the strategy for purchases of manganese ore adopted by Chinese producers of manganese ferro-alloys by means of relying on supplies and stocks from medium and small mines in such countries as Malaysia, and so on is durable for how long period. These points are anticipated to become highlights in the first half of 2009.
last modified : Wed 24 Dec, 2008 [10:13]
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