The Manganese Committee of the China Ferroalloy Industry Association called on its members to reduce ferroalloy production by 60% while minimising the purchasing of foreign manganese ore.

China is the largest producer and consumer of manganese ferroalloys, accounting for over 65% of global SiMn production and 52% of global HC FeMn production in 2021. The country’s manganese alloy industry has thrived in tandem with two decades of rapid growth in domestic steel production, which accounts for over 95% of manganese demand. Now, however, Chinese steel production has plateaued with national directives successfully curbing growth in crude steel production.

For the manganese industry in China, alloy capacity is highly fragmented across many plants with an excess capacity that has been reactive to short-term supply deficits and plagued opportunities for capacity growth elsewhere. On top of that, the largest producers continue to improve efficiencies to meet modern smelting standards, increasing the effective capacity year on year. Peak steel production has been exacerbated by weak demand over 2022 and together with more than sufficient manganese alloy production has underpinned falling prices to below typical production cost levels.

On July 22, 2022, the Manganese Professional Committee (MFP) of the China Ferroalloy Industry Association (CFIA) convened an emergency videoconference of more than 40 manganese member units across China due to current market conditions. Members were urged to reduce ferroalloy production by more than 60% and minimise the procurement of foreign ore currently trading at high costs. If successful, this would see weak demand sentiment accelerate through to ore suppliers.

The MFP is forecasting a three-year hardship for the ferroalloy industry. Project Blue forecasts a tight ore supply market for China’s alloys industry only to relax by 2025. As a result, the market prices are moving into a tug-of-war between weak demand and high costs of production. Longer term, energy consumption regulations and consolidation have the potential to suspend overhanging excess capacity in China and open opportunities for renewed investment.