India's manganese alloys sector is under significant pressure from falling export demand, mounting domestic overcapacity and narrowing margins, chairman of the Indian Ferro Alloy Producers' Association (IFAPA) Manish Sarda told Argus.
Prices are unlikely to rebound until geopolitical tensions in the Middle East subside, he added.
Prices of silico-manganese and ferro-manganese have fallen sharply and may decline further, until geopolitical tensions in the Middle East subside. And producers that are facing capital constraints may sell below production costs to maintain operations, Sarda said last week.
Argus assessed 60pc silico-manganese at $795-810/t fob India on 21 May compared with $910-930/t fob levels in mid-April.
Similarly, 65pc silico-manganese prices fell to $880-910/t fob levels on 21 May from $1,000-1,020/t fob on mid-April.
India's domestic 60-pc silico-manganese prices dropped by 14,000 rupee/t ($146.92/t) from mid-April to Rs75,000-76,000/t ex-works on 21 May. Assessments for 70pc and 75pc ferro-manganese were at Rs78,000-79,000/t and Rs84,500-85,500/t, respectively, on 21 May, down by Rs7,000/t and Rs11,000/t from April.
"I wouldn't be surprised if prices drop another Rs1,000/t beyond this," Sarda said, noting that liquidity constraints are forcing producers to prioritise cash flow over profitability. But producers with captive power retain a cost advantage and some margin buffer.
Prices briefly increased in early April, when war-related stockpiling supported prices.
But prices reversed quickly. Higher freight costs, tighter vessel availability, weaker export demand and a rise in domestic capacity forced some producers to cut prices aggressively to retain export volumes, despite a depreciation of the rupee, which would typically support exports otherwise.
Silico-manganese hit harder
Weak export demand puts greater pressure on the Indian silico-manganese sector given that silico-manganese is widely produced in India and that India is the largest seaborne trader. Only a small number of Indian companies produce ferro-manganese for the specialised steel market.
Higher freight and fuel costs have further reduced export competitiveness. The Middle East, previously a key export market, has experienced plant closures and a collapse in demand because of capital shortages and conflict, causing a sharper price fall of silico-manganese. Some Indian plants have reduced or stopped operations because of financial stress. Price recovery depends on stability and reconstruction in the Middle East.
"Until we see a complete stoppage of war and reconstruction happening in the Middle East we cannot see exports coming up for Indian producers," Sarda said.
Overcapacity driving the downturn
India has installed ferro-alloy capacity of about 5.5mn t/yr, while domestic demand is no more than 1.5mn t/yr. The country exports around 1.4mn t/yr, making it the world's largest exporter of silico-manganese and one of the largest exporters of ferro-manganese.
EU safeguard quotas are already limiting Indian shipments to Europe, and the Carbon Border Adjustment Mechanism (CBAM) will add further costs. Indian producers will eventually need to adapt and reduce their carbon cost exposure, but the near-term effect on competitiveness is negative.
"Any cost that comes onto the producer on the basis of CBAM is not going to make the product competitive," Sarda said.
Sarda is optimistic that the entry of state-run mining firm OMC to the manganese ore market could help reduce Indian alloys sector's dependence on imported ore. OMC will need time to scale up but could offer logistical advantages for producers based in India's eastern and southern regions sourcing ore from the state of Odisha.
State-owned mining firm MOIL is the largest manganese ore producer in India, with output of about 1.5mn t/yr. India is the second-largest buyer of manganese ore behind China, importing nearly 7mn t/yr.
Access to globally competitive power tariffs remains essential for the ferro-alloy industry, as electricity is the largest cost component. The removal of import duties on manganese ore is also a key requirement, since these duties add unnecessary costs given India's reliance on imports.
Policy discussions on both issues are ongoing, but progress has been slow, Sarda said.
Looking forward, Sarda expects a cautiously stable third quarter, with downside risks and continued export pressure resulting from uncertainties in the Middle East.
Sarda is also the managing director of Sarda Metals and Energy. Sarda Metals and Energy currently operates three furnaces at its Vizag plant — two 36 mega volt ampere (MVA) furnace and one 40 MVA furnace. It has received approvals for adding three more furnaces.
