LONDON Global manganese ore prices will continue to rise in the first quarter on strong Chinese demand, tighter supply and low inventories, market participants predict.
"Its certainly firming and there is a tightness," one trader told AMM sister publication Metal Bulletin. "Well continue to see an increase over the first quarter. Theres a high level of Chinese consumption and I think in (the second half of 2012) people priced in too much negativity."
Metal Bulletins index price for 38-percent manganese ore f.o.b. South Africa rose to $4.06 per dry metric ton unit (dmtu) of metal contained on Dec. 21 from $3.94 the previous week and a fourth-quarter low of $3.77 in mid-October. Metal Bulletins index price for 44-percent manganese ore c.i.f. Tianjin was $5.13 per dmtu of metal contained, down slightly from $5.15 a week earlier but well above the fourth-quarter low of $4.91 in October.
According to sources, ore producers had less material to offer into China for January and February.
"For sure we have been in a position to be very short term in our commitments to customers because we believe there could be some tightness and the price will go up," one supplier source said. "The market is behaving in such a way that it could happensales are going very fast. When we offered, everything went quickly, which was very encouraging."
Whether the rally will be sustained will depend on alloy producers, who will not be able to shoulder rising ore prices if alloy prices remain subdued, market participants said.
AMMs high-carbon ferromanganese price, for example, has dropped to between $1,100 and $1,180 per gross ton from between $1,190 and $1,230 at the start of the quarter.
Medium-carbon ferromanganese alloy prices also have dropped in the U.S. market, with AMMs spot price slipping to between 85 and 90 cents per pound on Dec. 20 from 89 to 91 cents the previous week and 90 to 92 cents at the start of the quarter.
"Certainly a restock is part of the reason for rising prices, but to what extent will ore buyers be able to continue to buy at these levels? Will they simply shut down instead?" one market source said.
Chinese buyers have been able to pass on the cost of rising ore prices because alloy prices have been rising faster there than in the United States or Europe. "The Chinese can afford to pay more; they can pass the cost on and the Europeans cant," the market source added. "Is this trend sustainable if the Europeans cant afford the ore?"
A version of this article was first published by AMM sister publication Metal Bulletin.