Market participants expect Chinese manganese prices to continue to increase in the short term in view of tight supplies caused by output cuts and low inventories.
Supplies may remain tight in July as most producers will cut production in line with a new round of output reductions initiated by the manganese industry alliance led by China's largest smelter Ningxia Tianyuan. Most producers will halt production for at least a week or up to a month to carry out their commitment to suspend operations for 30 days every four months, or a total of 90 days in 2021.
China's manganese output is forecast to fall by 30,000t to 70,000-80,000t in July. The government may shut down plants with capacity below 30,000 t/yr in the coming months as part of its plan to phase out backward capacity, with it likely to be completed earlier than previous expectations of 1-2 years, which could tighten spot supplies further, according to market participants.
Prices for 99.7pc grade flake have increased by 6.16pc since 1 July to 18,000-18,200 yuan/t ($2,773-2,804/t) ex-works today, the highest level since August 2018 and up by 13.13pc from 1 June. Export prices for 99.7pc grade flake rose to $2,850-2,900/t fob China today, up by 13.9pc from $2,500-2,550/t fob at the start of June.
Many producers suspended offering prices this week on expectations of even higher prices in the near future, with some deals concluded at Yn18,000-18,200/t ex-works today. Some suppliers have even stopped accepting bids below Yn18,500/t ex-works. Most producers remain upbeat about the price outlook next week, with some of them expecting prices to hit Yn19,000/t ex-works or as high as Yn20,000/t in the near future.
Key stainless steelmakers in China have had to accept higher tender prices following the rise in spot flake prices. Shandong Iron and Steel (SD Steel) lifted its tender price for 1,200t of manganese lump 97pc grade to Yn18,500/t on a delivered basis and paid by acceptance bill at the start of this week, up by Yn1,030/t from a tender it issued in early June. A Jiangsu-based steelmaker has purchased over 1,000t of lump 97pc grade at Yn18,900/t on a delivered basis and paid by acceptance bill. A Hubei-based steelmaker bought 200t of lump 97pc grade at Yn19,000/t on a delivered basis and paid by acceptance bill today.
