Manganese ore and concentrate production fell year-over-year in 2016, with operations reducing output or being placed on care and maintenance. However, with increasing output from new operations ramping up in South Africa and previous production curtailments being reversed during the year, new output has increased from the top ten producers, which account for almost half of global production.
Just as some manganese producers had reacted to depressed manganese prices by reducing output, others had moved ahead of the trend and increased production due to signs of the manganese market improving. Stocks of ore, built up during the period of low prices in the second half of 2015, were purchased while prices remained low. As traders rebuilt their stocks, demand increased, which, coupled with ore transport disruption in South Africa, sent prices soaring from the lows of the 2016 first quarter at US$2.10 per dry metric tonne unit, reaching prices not seen in over five years of US$9.0/dmtu.
Last year marked the turning of the tide in the manganese supply/demand dynamic. Nevertheless, concerns persist about the risk of manganese prices overshooting once more, which could lead to a drop in demand. However, demand has persisted, and while prices have retreated from the levels at the end of 2016, they have remained near five-year highs, and the outlook this year remains positive.
Groote Eylandt, owned by South32 Ltd. and Anglo American Plc, was the largest producer in 2016, with an output of 5.0 million tonnes of manganese ore, with the Premium Concentrate Ore 2 project adding 0.5 million tonnes per year of production capacity when it was completed in June 2016. The operation is not yet operating at full capacity due to the current challenging market conditions for manganese ores, and so reported a modest drop in output for the full year.
Due to improving manganese prices, Eramet's Moanda mine was able to restart mining operations in 2016 after closing earlier in the year. Despite the closure of the operation due to poor market conditions, Moanda was still the second-largest manganese producer. The operation ended 2016 with a production of 3.4 Mt. However, future production may suffer at this mine, as the deposit is becoming increasingly geologically complex.South32 and Anglo American-owned Hotazel showed the largest tonnage increase in 2016 with its 3.1 Mt bringing production back to normal levels after a drop in output in 2015. This increase in production was due to a drawdown of stockpiles at the company's Wessels operation. The outlook for 2017 is uncertain, as production will vary according to market demand, according to the owners.
Nchwaning/Gloria, owned by African Rainbow Minerals Ltd. and Assore Ltd., reported lower output of under 2.9 Mt, with improvement work on the Nchwaning 2 shaft having an impact on output. A ventilation shaft at Gloria was also completed during the year. When the improvement program is complete, output is expected to increase to between 4 Mt and 5 Mt.
Kalagadi is estimated to have had the second-largest increase in manganese output last year. Kalagadi started production in 2014, and estimates reflect an anticipation of full capacity of 3.0 Mt/y. Growth in output was tempered due to security issues on the site. The theft of copper and other electrical infrastructure resulted in the temporary closure of the site.
Consolidated Minerals Ltd.'s Nsuta reported a sharp increase in manganese production, from 1.5 Mt to 2.0 Mt. This one-third increase in production was attributed to accelerated development and increased mining activities in response to higher demand from China for manganese carbonate ores. However, the company's Woodie Woodie property in Australia was placed on care and maintenance in February 2016. Mining ore was no longer considered economically viable at that time of low manganese prices, and continuing operations was viewed as potentially destroying the future value of the existing reserves. This resulted in an 84% drop in ore output year-over-year at Woodie-Woodie.In January 2017, Consolidated Minerals made the decision selectively to process some low-grade stockpiled material while operations at Woodie Woodie remain suspended. The company has sincebeen acquired by China Tian Yuan Manganese Ltd., a subsidiary of Ningxia Tianyuan Manganese Industry Co.
Tshipi Borwa, located in South Africa, is primarily owned by Western Australia-based Jupiter Mines Ltd. and Singapore-based commodity trading specialists OM Holdings Ltd. Production estimates for 2017 indicate output rising from 1.8 Mt to 2.1 Mt. However, as the operation is in a position to increase production rapidly, and with beneficial rail loading facilities, output is expected to rise quickly this year. Jupiter Mines seeks to become the largest exporter of manganese ore from South Africa, targeting 3 Mt of ore exports in the financial year that ends in February 2018.
The OM Holdings-owned Bootu Creek mine in Australia's Northern Territory was placed on care and maintenance at the end of 2015 due to low commodity prices, reducing supply by nearly 0.8 Mt in 2016. The operator of the mine, OM (Manganese) Ltd. (OMM) was placed in voluntary administration at the start of 2016 but regained control of the operation later in the year. Permission was granted to restart the mine in December 2016, although the required preparations meant operations did not restart until February.
Growth in the supply of manganese ore and a weakness in stainless steel growth led to an increased oversupply in the manganese ore market between 2010 and 2015. Despite a seeming rebound in the market and apparent respite for producers, the fortunes of manganese remain fragilely tied to the strength of the Chinese stainless steel sector.
In a market where supply restraint could meaningfully support prices — and such low prices forced the suspension of activities at Woodie Woodie, Bootu Creek and Moanda, and restraint at Groote Eylandt — growing production in Africa, such as at Tshipi Borwa and Nsuta, should take much of the slack out of the supply/demand balance. As such, prices may remain volatile into 2018 and are likely to be influenced significantly by any changes in stocks. Yet this volatility will only last so long as it takes producers to alter mine plans, deploy minesite stockpiles or bring mines into or out of suspension to match fluctuations in demand and available stocks. Many of the significant producers have stated their intention to flex production this year, and we expect this to continue in 2018.
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