OMH shareholders realise the importance of cheap power. OM Sarawak having some of the cheapest electricity/power in the world at their Samalaju ferro alloy plant at SCORE Sarawak.
S32's manganese alloy plants are about to bite the dust as they cannot compete with the huge alloy plants like OM Sarawak.
The reason is expensive power.
Two years ago S32 admitted that "We think overall it may see some demand filtered off to cheaper sources" at that time S32 laid off workers at their Tasmanian TEMCO plant. S32 also has a dumping duty payable in the US of 11.9%.
Long term S32 plants in Tasmania and South Africa were never going to be competetive with OM Sarawak due to power costs triple those of OMH.
Yesterday in a S32 presentation it said it was reviewing its manganese alloy smelters in Tasmania and South Africa.
Diversified resources group South32 is reviewing options for its manganese alloy smelters in SA and Australia, potentially selling or closing the operations because of changing market conditions.
Diversified resources group South32 is reviewing options for its manganese alloy smelters in SA and Australia, potentially selling or closing the operations because of changing market conditions.
In a presentation to the Bank of America Merrill Lynch Global Metals, Mining & Steel conference, South32 CEO Graham Kerr said the company was “reviewing options for our alloy smelters as changes in market dynamics have reduced the attractiveness of our exposure”.
South32 describes itself as the largest producer of manganese ore and a major source of manganese alloys, which is mainly used to make steel, giving it strength.
SA has installed manganese alloy-making capacity of 1.2million tons a year, but about 40% of this is used, according to a June 2018 document carried in the Journal of the Southern African Institute of Mining and Metallurgy. SA has 80% of the world’s known manganese resources.
The document noted that more than 80% of SA’s manganese is exported as ore, with high electricity costs, a “lucrative export market for ore” and relatively stable manganese alloy prices meaning the reduction of manganese alloy production.
Kerr gave no further details, but a South32 spokesman said the decision to review the assets came from the increase in production in China and India of ferromanganese to supply their steel mills and the higher output of cost-effective manganese smelting in Malaysia, which is closer to those markets.
“Over the next few months we will undertake an assessment of the options for each operation including divestment, care and maintenance, or closure. No final decision has been made on the way forward. We will provide a further update in October 2019,” a South32 spokesman said.
SA is by far the world’s leading source of manganese ore, but its smelting industry has been crippled largely by rampant increases in electricity costs, forcing companies such as African Rainbow Minerals and Assore in their Assmang joint venture to build a manganese alloy plant in Malaysia.
ELECTRICITY
The Minerals Council of SA has said the price of electricity has increased by 523% for industrial users since 2006 and it faces another 30% increase over the next three years.
This would not only lead to the closure of energy-intensive furnaces but prevent future investment in such plants, the council’s CEO Roger Baxter has said, noting that this made the government’s demand for beneficiation or improving the value of SA’s mineral exports an unrealistic expectation.
For South32, the price rises contributed to its decision to reduce its smelting footprint to one furnace from four.
In South32’s Tasmanian manganese alloy business, Temco, the operations needed an expensive upgrade to the elderly plants, which are more than 50 years old.
The operations employ about 300 people each. Metalloys in SA generated 79,000 tons of high- and medium-carbon ferromanganese in 2018 and Temco produced 165,000 tons of high-carbon ferromanganese, silicomanganese and sinter.
The underlying manganese operations in SA and Australia increased output by 10% to 5.5million tons during 2018 with each country producing 2.15million tons and 3.4-million tons respectively to take advantage of higher demand.
The manganese ore price averaged $6.88/ton in 2018, up from $5.77/ton the previous year. The price of manganese alloy increased 16% to $1,342/ ton over the same period.
“The price increase was supported by positive demand growth and lower domestic ore production in China, amidst tightening environmental restrictions,” South32 said in its 2018 annual report referring to manganese ore.
It said the Western Europe spot high carbon ferromanganese price weakened 19% during financial 2018 due to increased ferro alloy supply in the seaborne market.
World manganese ore production increased by 13% during 2018 to 21-million tonnes, with Australia, Ghana, India and Brazil ramping up output.
SA provides about a third of global manganese ore, according to the International Manganese Institute.
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