Supplies to drive Mn as steel demand persists: South32

The manganese ore market outlook to mid-2021 is likely to be reliant on supplies as alloy demand from the steel industry remains buoyant, according to Australia-based diversified resources firm South32.

The long-term price of manganese ore will be set by marginal South African supplies transitioning underground over time, South32 said along with its results for the July 2020-June 2021 fiscal year.

South Africa's supply disruption and recovery have driven prices this year, with prices surging when mines were closed with Covid-19 lockdowns and then reverting back to the marginal cost of trucked manganese ore when mines resumed production. South Africa accounts for around 40pc of global manganese ore output and is the world's largest exporter.

South32 produced a record 3.47mn t of manganese ore in 2019-20 and has issued an output guidance of 3.5mn t for 2020-21. Its South African output was 1.87mn t in 2019-20, which is forecast to rise to 2mn t in 2020-21.

The firm attributes an alumina price rise of around 20pc since April to higher Chinese imports and supply curbs. The cost curve is expected to rise in the medium term as raw material input costs increase and Chinese domestic bauxite quality deteriorates. LME three-month aluminium prices recovered to $1,770/t in late August from $1,450/t in early April.

South32 produced 5.27mn t of alumina in Australia and Brazil in 2019-20 and expects this to increase to 5.34mn t in 2020-21. Aluminium output in South Africa and Mozambique totalled 986,000t in 2019-20, which is projected to rise to 993,000t in 2020-21.

Nickel output from the Cerro Matosa mine in Colombia is expected to fall to 33,500t in 2020-21 from 40,600 in 2019-20 with a furnace shutdown scheduled for the October-December quarter.

While zinc equivalent output from the Cannington multi-metal mine in Australia expected to edge down to 330,800t in 2020-21 from 332,600t in 2019-20, production guidance for 2020-21 is 10pc higher than the original forecast. Mill throughput continues to benefit from firmer performances in underground mining and higher grades, South32 said. Cannington produces silver, zinc and lead.

By Angus Macmillan