Chinese Government Instructed To Reduce The Facilities, This Action Will Become Frame To Tighten Its Supply

The Central Government of China (Ministry of Industry and Information Technology) notified on the 25th November of 2009 the industries concerned in steel and ferro-alloy about their instructions to remove the outworn facilities and the objective quantity of these outworn facilities for ferro-alloys to be removed is estimated to be 1,621,000 tons. It was also known recently that these outworn facilities to be removed have included those to produce electrolytic manganese metal.

The three provinces of Hunan, Guizhou and Guangxi have been called as the triangular zone to produce electrolytic manganese metal in China and well known as the area, on where the facilities for this production have excessively concentrated. According to the policy adopted by the Central Government of China, these outworn facilities have to be removed and, when the materialization of this policy progresses, the supply situation of Chinese electrolytic manganese metal will become restrictive. Consequently, a possibility to put a certain influence on price of electrolytic manganese metal produced in China is thought to come up.

Among the outworn facilities to produce ferro-alloys as instructed by the Central Government of China to remove within 2009, the scales of these facilities concerned closely with areas for production of manganese metal are estimated to be <> Hunan Province : 269,00 tons, <> Guizhou Province : 370,400 tons and <> Guangxi Zhuang Aut. Region : 166,000 tons and <> Total : 805,400 tons. The matter of how many facilities for production of electrolytic manganese metal are necessary to be removed is not clearly known yet but the plants located in Guangxi Zhuang Aut. Region have been already rationed electricity supply and there is an anxiety in the market that this movement to ration electricity supply is how to spread over its influence to the production in Hunan Province and Guizhou Province.

The Central Government of China has raised simultaneously throughout the country from the 20th November of 2009 electricity fees by 5% on the average and, according to an estimation by Chinese producers of manganese metal, this raise of electricity fees has certainly caused to increase the cost for production of manganese metal. The costs to produce electrolytic manganese metal in China have been broken down as per the table attached hereto. This table has shown the total cost for this production as CNY14,560 per metric ton and domestic prices of electrolytic manganese metal offered currently by Chinese producers are in the range of CNY14,600 – 14,800 per metric ton ex. plant, having risen by CNY1,000 per ton compared with those (CNY13,600 – 13,800) as offered in two weeks ago.

However, such steel companies as stainless steel mills have felt an opposition to this steep rise of price for Chinese electrolytic manganese metal but, when the system to remove these outworn facilities starts, the supply situation of this metal in China has included the factors to tighten and, therefore, it is marked how does the supply of Chinese electrolytic manganese metal move hereafter.

For a reference, reflecting a reduction in production of stainless steel on the worldwide scale, a trend to export electrolytic manganese metal from China in 2009 is strongly anticipated to decrease but, in view of the increased cost for production of this metal in China, many of Chinese shippers are still offering electrolytic manganese metal for export at US$2,750 – 2,800 per metric ton FOB. In Japan, some of steel companies have already purchased Chinese electrolytic manganese metal for shipment in January of 2010 and, therefore, a strong possibility to contract with Chinese shippers on electrolytic manganese metal at nearer prices to those as offered from Chinese side is foreseen. These recent purchases of Chinese electrolytic manganese metal are the countermeasures by taking into consideration of the difficulties for chartering bulk vessels and the long holiday season for Lunar New Year in China. At all events, a basic tone for price of Chinese electrolytic manganese metal is a further rise. For a reference, an index of market price for electrolytic manganese metal in Europe is that of Chinese electrolytic manganese metal stocked at warehouses in Rotterdam and this Chinese product is now being offered at US$2,800 – 2,850 per metric ton on DDU base. The purchases of electrolytic manganese metal to supplement the stocks in advance of Christmas are being sporadically seen. (TEX Report)