EU Mn flake prices rise on China output cuts

European manganese flake prices are rising as fresh production cuts in China bolster a market already disrupted by months of shipping delays and higher freight rates.

Prices for 99.7pc grade flake have risen by 65pc this year, with Argus' assessment hitting $3,600-3,700/t du Rotterdam on 15 July, up from $2,150-2,250/t on 4 January and the highest since September 2011.

Gains have been underpinned by tight spot availability and high freight costs, with shipping delays and cancellations worsening since the start of the year, depleting European inventories against a backdrop of strong consumer demand.

Prompt material is now regularly being offered in Europe at above $3,800/t du Rotterdam. One trader recently sold 15t — a relatively small lot — at $4,000/t du Rotterdam, although the wider market is not at such high levels.

Europe's inventories could come under additional pressure as several producers in China's manganese alliance, led by Ningxia Tianyuan, cut output this month. There have been several cuts in recent months, after strong production in the second half of 2020 resulted in high stocks in Chinese warehouses and weighed on regional prices.

Between 13 May and 3 June, fob China prices held steady at a midpoint of $2,525/t, but values in Europe surged to a midpoint of $3,350/t du Rotterdam from $2,950/t. Freight rates were pegged at $200/t during the period, which implies a $300-500/t spread between cif and du Rotterdam prices as concerns about tight supply and delays allowed some sellers to achieve steadily higher prices.

Chinese flake export prices have since risen as successive waves of production cuts take effect, with Argus' fob China assessment now at $3,020-3,070/t, up sharply from $2,720-2,770/t on 1 July.

The supply shortage has slowed European spot trade, particularly as many buyers are unwilling to engage with spot prices spiking. "Flake demand is very low," one trader said. "People either have no material or they are absolutely afraid to buy at current levels." Instead, forward delivery for release in late August or September has seen more activity.

Backwardation persists

Europe's flake market has been in backwardation since May, when bookings for delivery in late June and early July were made at $2,730-2,800/t du Rotterdam, against prompt prices assessed at $3,175-3,250/t on 18 May. And the situation has persisted amid acute supply concerns.

In early July, offers for the second half of August were at just over $3,000/t du Rotterdam. Last week, offers for that period rose to $3,250/t du Rotterdam, but this still lags prompt spot prices assessed at $3,600/t du Rotterdam. As the second half of August draws nearer, offers for the period are now as high as $3,400-3,500/t du Rotterdam.

By Yusuf Khan

Production cuts push Mn flake higher $/t