India’s silico manganese exports spurt 47% in 2021. Know why?

India consolidates position as global leader in silico manganese exports
*  India’s silico manganese exports spurt 47% y-o-y in 2021
*  Italy was leading importer, with volumes rising 135% y-o-y
*  Europe’s energy crisis a key reason behind rising exports
*  Ukraine’s production cuts helped Indian producers gain newer markets
*  Rising prices last year encouraged Indian exporters to export
*  Exports may stay buoyant if Europe’s energy supply is disrupted by escalating Russia-Ukraine tensions

India seems to be consolidating its position as the global leader in silico manganese exports. The country’s exports of the material spurted by a sharp 47% in 2021 to 1.02 million tonnes against 0.69 mnt seen in the previous year.

The volumes were pulled up essentially by Italy, whose imports spiralled up a massive 135% to 0.14 mnt in 2021 against a little over 61,000 tonnes in 2020.

The next highest importer was Japan at 0.13 mnt in 2021 against almost 86,000 tonnes in the preceding year, a sharp jump of 50%.

Volumes to the UAE, although showed a 14% drop, were still at third sport with 85,631 tonnes against 99,420 t in 2020.

India produces both 60:14 and 65:16 grades with the latter seeing more exports. Durgapur in West Bengal and Vizag in Andhra Pradesh are two manufacturing hubs closer to ports and enjoy the twin advantages of exporting silico manganese and importing manganese ore, its raw material. Raipur in central India is also a key producing zone.

What factors drove up silico manganese exports?
India has traditionally been the highest exporter of silico manganese. However volumes spurted last year by 47% due to various factors:

• Europe’s energy crisis: Europe was a key market, driven by the energy shortage and spiralling gas prices there. As EU countries returned from Covid-induced lockdowns, their economies revived, necessitating more use of electricity industrially as well at the household level, fuelling a shortfall. This was aggravated by long winters and less maintenance of oil and gas fields during Covid outbreaks and consequent lesser investment in the segment. Coal-fired power having been largely phased out in Europe and inadequate wind power generation led to supply crunch and spiralling prices of natural gas. From a low of Euro 30 per megawatt hour (mWh) in June last year, benchmark prices of natural gas zoomed to easily over Euro100/mWh in Nov’21. Ferro alloy units are, meanwhile, highly power-intensive and the scenario led to temporary closure of such units, forcing end-users to import from India and other countries.
• Ukraine’s supply cut: Some of Ukraine’s largest producers were forced to reduce silico manganese production as the country’s National Commission for State Regulation of Energy and Public Utilities decided to hike power tariffs starting Aug’21. As a result, buyer countries habitually procuring from Ukraine had to scout for new sourcing destinations, where India stepped in majorly. Ukraine’s exports, meanwhile, rose a modest 19% last calendar.
• Higher prices, meatier margins: Prices of silico manganese spiralled almost out of control last year, which encouraged exports by Indian producers, helping them rake in good margins. FOB prices from India, which were cruising at less than INR 1,000/t levels around Feb’21 last year, skyrocketed to around $1,800/t around Nov’21. Indian exporters could take advantage of Ukraine’s limited presence in the market because India has an installed capacity of around 3 mnt whereas actual production is 2.25 mnt per annum. This allowed producers room to increase production to accommodate export sales volumes. Of the 2.25 mnt, while 1.02 mnt were exported, the balance was consumed domestically. The lucrative exports helped producers rake in margins of INR 45,000-55,000/t, inform industry sources.
• High demand from Egypt: Local producers can serve only domestic ferro silicon demand while home-grown steel mills are dependent on imports of silico manganese. Last year, India accounted for almost 80% of Egypt’s total manganese alloy imports. India being geographically closer to Egypt, buyers had no alternative destination for faster delivery, SteelMint understands.

“India is well placed as the least-cost producer of silico manganese compared to other competing countries because its domestic coal is available in good volumes and is cheaper against imports. This is keeping power costs much lower compared to Europe. India also has access to medium grade manganese ore. These factors are making India a force to reckon with,” says an industry source.

Outlook

There can be energy supply disruptions in Europe if the geopolitical tensions between Russia and Ukraine escalate. This could keep electricity tariffs high across countries and force EU units to look towards imports. This would allow silico manganese export prices from India to stay firm and help it to further strengthen its position as the leading exporter.