India’s manganese ore imports drop 48% q-o-q in Jul-Sep’22. How will Q3 unfold?

• Steel demand drop, rupee slide impact volumes
• Imports closely linked to silico manganese export trends
• Prices may find support on logistical issues in South Africa

Morning Brief: India’s manganese ore imports showed a sharp drop in the second quarter or Q2 (July-September) of financial year 2022-23 (FY23) against Q1 (April-June, 2022), as per data maintained with SteelMint. Volumes in Q2 dropped a sharp 48% to 0.92 mnt compared to 1.77 mnt recorded in Q1.

The Q2 volumes were also 37% lower y-o-y compared to 1.45 mnt seen in the same quarter in FY22.

However, with import volumes in Q1 being robust at 1.77 mnt, overall manganese ore imports showed a marginal 1% dip in the first half (H1) of FY23 to 2.70 mnt against 2.73 mnt seen in H1FY22, data revealed.

Reasons for the sharp drop in manganese ore imports in Q2FY23

Global demand see-saw: It may be recalled global demand, especially from the Eurozone, for steel had shot up shortly after the onset of the Russia-Ukraine war. Buyers resorted to panic buying which increased steel demand as well as prices. In India too, mills exported a good amount of steel over April-May, especially to Europe in May. India’s crude steel production in both April and May stayed above 10 mnt. Higher steel demand in Q1 necessitated higher manganese alloys production and exports.

However, as the war wore on, Europe became well-stocked and high energy prices and inflation forced mill closures there.

In India, domestic demand too took a hit amid monsoons and inflationary trends. The drop in steel demand led to lesser requirement for manganese alloys and thus Q2 saw the sharp drop in demand for imported manganese ore.

Silico manganese exports drop: Manganese ore import trends are considerably governed by silico manganese export trends. Exports, especially to Europe, comprise around 70% of the market. In FY23 so far, exports comprise 0.5 mnt with Italy’s share at 12%, and Turkey, Japan and Egypt enjoy 10% each.

Indian silico manganese exporters were on an even keel till July. However, from August, the market entered a bear zone with a drop in exports amid the decline in global demand, spiraling energy prices and European mill closures. SteelMint’s data reveals that silico manganese exports over April-July were steady at 0.11 mnt, 0.13 mnt, 0.12 mnt, and 1.1 mnt respectively but in August these dropped to 0.10 mnt. Silico manganese producers, weighed down by inventory, were pressured to cut production by 10-20% in Q2.

The global currency slide also hit silico manganese exports from India.

Electricity tariff revision: Power tariffs were revised upward in the Durgapur region from July, a hub of silico manganese production in India. This raised the cost of production of silico manganese by INR 4,000-5,000/tonne (which is currently hovering at around INR 78,000-80,000/t), leading to lower capacity utilization by the smelters who are already facing a dull exports scenario.

Rupee slide: The rupee slide also impacted manganese ore imports, making the material costlier in India. The rupee has eroded 12% against the dollar from 74 levels a year ago to the current 82.

Drop in Indian steel exports: The 15% export duty slapped in May led to a sudden drop in overseas sales from Indian mills. Saddled with inventory they resorted to production cuts and preponing of maintenance shutdowns even as domestic demand stayed lukewarm. Many of the mills have yet to reach their full capacity utilization faced with demand challenges.

Leading suppliers in Q2FY23

• Imports from South Africa down 46%: South Africa continued to remain the largest exporter of manganese ore to India although volumes dropped to 0.415 mnt in Q2FY23 against 0.763 mnt in Q2FY22. Imports from South Africa were down 13% y-o-y to 1.36 mnt in April-September, 2022.
• Imports from Gabon drop 31%: Gabonese manganese ore imports dropped 31% to 0.276 mnt in Q2FY23 against 0.410 mnt in Q2FY22. Decline in export demand for high-grade silico manganese led to a decrease in demand for Gabonese ore from domestic alloys producers.
• Imports from Australia down 13%: India imported 0.146 mnt of manganese ore from Australia in Q2FY23 compared to 0.167 mnt in Q2FY22. Container shortage and rise in freight costs impacted Australian imports during the month.
• Imports from Zambia down 11%: India’s imports of manganese ore from Zambia were down 11% to 0.006 mnt in Q2FY23 against 0.007 mnt in Q2FY22.
• Imports from Brazil rise manifold: India’s imports rose manifold to 0.075 mnt in Q2FY23 in comparison to Q2FY22.

India’s manganese ore production  

India’s manganese ore production, meanwhile, has been dropping steadily since 2019, as per SteelMint’s data. From 2.81 mnt in 2019, it dropped to 2.69 mnt in 2020 and 2.46 mnt in 2021.