doubledowncasinobonus| It's too "manganese"! Impact of South32 Port Damage on Manganese Supply and Demand Pattern

South China futures

1. Event review

March eighteenthDoubledowncasinobonusTropical Cyclone Megan caused widespread flooding on Australia's Groote Eylandt Island, causing serious damage to infrastructure, including docks, port facilities and transport roads and bridges.

On April 22nd, South32 released its quarterly report for FY24, South32 said that the repair of infrastructure such as terminals and transport roads and bridges is under way, and terminal operations and export sales are expected to resume in the third quarter of FY25 (the first quarter of 2025).

Affected by this, the price of manganese ore in the port has risen sharply. Can the rising trend of manganese ore continue? What will happen to the global supply and demand pattern of manganese?

2. Supply and demand pattern of manganese element

twoDoubledowncasinobonus.1 global manganese ore reserves

According to the data released by the US Geological Survey, as of 2023, the global manganese ore reserves are 1.9 billion tons, but the high-grade manganese ore reserves are only about 700 million tons, and are basically located in the southern hemisphere (South Africa, Australia, Brazil and other countries). China's manganese ore reserves are not low, but there are some problems in domestic manganese ore resources, such as low ore grade and great difficulty in mining, and the actual recoverable reserves are not high.

2.2 Global manganese ore production

In 2023, a total of 20 million tons of manganese ore were produced worldwide. The top three countries are South Africa, Gabon and Australia, of which South Africa produces 7.2 million tons, accounting for 37 percent; Gabon produces 4.6 million tons, accounting for 24 percent; and Australia produces 3 million tons, accounting for 16 percent. The manganese ore of South Africa is of high grade and is a medium-to-high grade ore with a manganese content of 30-40%. Australian and Gabonese ores are high-grade ores with an average manganese content of 40-50%. The manganese content of ores in our country is only 15-32%, and high-grade ores are extremely scarce. Australia Mine occupies an important position in the high-grade manganese ore market, the impact of this incident on the supply of high-grade manganese ore can not be underestimated.

2.3 domestic manganese ore supply

China's manganese ore reserves are not low, but the actual recoverable reserves are low, so China's manganese ore is heavily dependent on imports. In 2023, China imported 31.42 million tons of manganese ore, while domestic manganese ore was only 7 million tons, and its dependence on overseas manganese ore was as high as 80%. According to the data released by the US Geological Survey, China's manganese ore output in 2023 is only 740000 tons, which is too small for reference. According to the Annual report of the EPD Conference of the International Manganese Association (2022), China's manganese ore output in 2022 is 6.45 million tons, based on which it is estimated that the domestic manganese ore output in 2023 is about 7 million tons.

In terms of import structure, China mainly imports manganese ores from South Africa, Australia and Gabon. In 2023, China imported 14.64 million tons of South African manganese ore, accounting for 49 percent, 5.25 million tons of Australian ore, accounting for 18 percent, and Gabon ore of 4.9 million tons, accounting for 16 percent. Due to the weak pricing power of high-grade manganese ore in China, the suspension of Australian ore shipping will have a great impact on the domestic manganese ore market, or lead to the imbalance between supply and demand of high-grade manganese ore.

2.4 Manganese ore demand

More than 90% of manganese ore is used in the production of manganese alloys (Si-mn, mn-Fe) and metal manganese. Manganese ore is closely related to the iron and steel industry. Silicon and manganese is the largest downstream industry of manganese ore. According to the consumption of 2.2 tons of manganese ore in the production of one ton of manganese ore, the silicon-manganese industry consumes a total of 25.34 million tons of manganese ore in 2023. Recently, the production cost of domestic silicon-manganese plants has risen rapidly, the losses of enterprises have intensified, and the willingness of enterprises to resume production is not strong, but with the profit repair of steel mills, the output of hot metal is expected to maintain growth. Driven by demand, the profits of silicon and manganese enterprises may be repaired, and the operating rate may increase slowly. Even if the loss pattern of Si-mn plant is difficult to change, the current start-up of Si-mn is on the low side, and there is little room to continue to reduce production.

In the medium and long term, the domestic iron and steel industry has entered a period of steady development, the output of crude steel has reached the theoretical upper limit, and the space for further growth is limited. But around the world, the growth rate of steel consumption in emerging markets such as India and Vietnam is eye-catching, which will play a good supporting role for manganese. Comilog expects the global steel industry to grow at a compound annual rate of 1 per cent between 2023 and 2026.

3. Impact of South32 Port damage on Manganese supply

3.1introduction of South32 production and marketing

South32 is the world's largest producer of manganese ore, operating two major mines, Groote Eylandt Mining Company (GEMCO) and South Africa Manganese.

Located on an island in Carpentali Bay, Australia, GEMCO is an open-pit mining company that produces high-grade manganese ore. South32 owns 60 per cent of GEMCO and the remaining 40 per cent is owned by Anglo American. In fiscal year 2023, GEMCO produced 3.545 million tons of manganese ore.

GEMCO has two mining areas in the east and west, and the company is planning a new project called Southern Lease (yellow area below), which will begin construction in 2026. After the completion of the project, Southern Lease will be combined with the existing two major mining areas to contribute 15 million tons of new production capacity of manganese ore.

In fiscal year 2023, the average monthly manganese ore production at the South32 Australian mine was 300000 tons, and if Australian ore shipments fail to return to normal in 2024 and there are no other alternatives, it will reduce the global manganese ore supply by 2.4 million tons. It is understood that nearly 70 per cent of South32's manganese ore is shipped to China, which could affect China's Australian mine imports by up to 1.7 million tons.

3.2 History repeats itself?

In 2024, the contradiction between supply and demand of global manganese is expected to be alleviated, and the imbalance between supply and demand of domestic high-quality manganese ore may be aggravated. In order to evaluate the impact of this round of manganese ore rise on the silicomanganese market, this paper compares the impact event of manganese ore shipping in South Africa in 2020 with this event.

Time: March 2020 to April 2020

What happened: the President of South Africa announced a nationwide blockade for 21 days from March 26, 2020, market expectations of a tightening of manganese ore supply increased, and manganese ore port prices shot up rapidly in mid-March. The price of semi-carbonate manganese ore in Tianjin Port of South Africa rose from 34 yuan / dry tonnage (mid-March) to 58 yuan / dry tonnage (late April), an increase of as much as 70%; the double silicon cost difference (SF-SM) fell from-750yuan / ton to-2400 yuan / ton; the double silicon price difference decreased from-480yuan / ton to-1550 yuan / ton.

Contrast:

A. it is estimated that the impact is even greater: South Africa's manganese ore imports decreased by 1 million tons in the second quarter of 2020, and the impact of Australian ore imports in this event may reach 1.7 million tons.

B. the cycle is longer: in 2020, the market lasts from February to March, and this event may last as long as half a year.

C. The impact on the high-grade ore is even greater: the domestic high-grade manganese ore resources are scarce. As an important supplement to China's high-grade manganese ore resources, the suspension of its shipment will have an impact on the domestic manganese ore market.

4. Strategic recommendations

The difference between September and January is expected to be 450-500. The difference between September and January is expected to be 390.

To reduce the SF-SM price difference, the lowest price difference between double silicon 09 in 20 years has been-1680. This round of double silicon 09 price difference is expected to exceed this record.

Risk points: Australian ore shipments resumed; Gabon manganese ore increased significantly; demand exceeded expectations and weakened;

Important statement: The above comments were provided by analyst Yuan Ming (Z0012648) and assistant analyst Zhang Xuan (F03118257). The opinions are for reference only and do not constitute any investment advice. The market is risky and investment needs to be cautious.

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