Japanese steelmakers plan to increase their stocks of silicomanganese this year, expecting prices to rise in 2008, local traders said on Thursday.Japanese traders and some steelmakers are currently negotiating prices of silicomanganese for shipment in the fourth quarter of this year. Traders in the Q4 talks said steelmakers plan to source ahead for Q1 next year already, as they project higher prices in 2008.
Smaller steelmakers who do not have their own ferroalloy production facilities and have to rely entirely on imports from China believe that possible tax changes in China and rising manganese feedstock prices will drive prices up in 2008, sources said. One trader said one mill appeared to have settled Q4 and Q1 2008 price talks this week. A procurement official at another mill commented that if possible, he would like to source all his required material within September.
There is a market rumor that the Chinese export tax on silicomanganese will be raised to 15% from the current 10%, effective this October at the earliest, sources said. "Chinese exporters are urging buyers to buy as soon as possible, before taxes go up," said a trader based in Tokyo. Two traders in Tokyo and another in Osaka were told by one Chinese supplier last week that the supplier had sold out for October shipments.
Prices of manganese ore, used for making silicomanganese, have risen by 8-10%. A Japanese manganese metal trader said prices of Australian-origin manganese ore for Q4 contract shipmentf to China settled at $6.50-7.50/dry mt CIF main ports China, up from $6-7/dmt CIF for Q3. The global manganese ore supply is expected to tighten in 2008 on the back of decreasing manganese ore production volumes in South America, a second trader said. Currently, some Chinese silicomanganese producers not on contracts are believed to be paying $8/dmt CIF to source spot manganese ore of African and South American origin, but perhaps in 2008, $8 would be a universal price, some sources suggested.
If electric power costs in China rise, silicomanganese costs rise as well, but sources said power costs were not a major concern currently.
A third trader made a cost simulation. The current costs of making silicomanganese (65% Mn) using the $6/mt ore are $1,100/mt: $540/mt for feedstock, $270/mt for power, $300/mt for labor, transport and other costs excluding export tax. If manganese ore prices rose to $8/mt, the total production cost would rise to $1,300/mt. If the export tax hike is implemented, the export price to Japan would rise to $1,500/mt on a CIF basis. In early September when Q4/Q1 2008 silicomanganese talks started, prices were indicated at $1,150-1,270/mt CIF Japan
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