Viewpoint: Europe Mn flake prices to pull back in 2021

European prices for manganese flake are likely to pull back in the first quarter of 2021, after a recent increase in freight rates for material being exported from China led to a jump in prices in the fourth quarter.

Prices currently stand at $1,860-1,930/t for manganese flake du Rotterdam, having stood at $1,580-1,650/t on 5 November — a rise of 17pc. That said, this price rise is likely to cool over the festive period and more importantly Chinese New Year as demand falls, with production slowing in Europe's mills and output of flake dropping in China in early February.

Lack of containers forces price up

The issue at hand for manganese and other minor metals coming into Europe has been a lack of container availability in China.

With China continuing its Covid-19 recovery, output of industrial goods has soared, using up large volumes of containers in the process and cutting the supply of containers that would usually be sent to Europe. This combined with reduced capacity on shipping vessels because of the lower volumes seen this year has meant that freight prices from Asia to Europe have skyrocketed.

The two-year spot freight rate on 3 December stood at almost $3,500 per 40ft container, the World Container Index shows — a sharp rise given that prices were roughly $1,000 per container lower two months earlier. One participant said that for shipment at the start of December they had been quoted prices of $2,000 per container, but by late in the month this had risen to over $3,500.

For goods such as manganese flake, where almost all production takes place in China, this issue has caused prices of the minor metal to soar and has also led to changes in buying practices. One participant said that they were only signing on for back-to-back trades as they did not want to hold on to material in Rotterdam for fear of a price crash.

But this issue is expected to reset somewhat by March, as falls in demand for flake from Europe during the festive period and a reduction in production during Chinese New Year celebrations free up container availability. One participant said that they expected a "reset by the spring", while others were pricing in a fall for early March.

European demand still fragile but hopes higher

Despite the rapid rise in prices, demand for flake in Europe remains fragile and is expected to continue to be during the first quarter.

Stainless steel production remains at low levels compared to the same period a year ago, and with lockdowns looming and the number of Covid-19 cases still high, demand for consumer products and auto is likely to remain suppressed.

These low production levels meant that prices for manganese flake were falling until container rates started to raise prices. Deals were confirmed as low as $1,580/t du Rotterdam at the start of November.

For most participants, the low demand levels coupled with the reset in container prices should allow for prices to pull back, although whether they fall to the same levels as at the start of November remains to be seen. Most participants were more bullish, suggesting that with vaccines being rolled out in Europe and the US, it was likely that consumer demand would be higher in the first half of 2021 than in the last quarter of 2020, which could support prices following the container reset.

By Yusuf Khan