South32 has announced the suspension of operations at its GEMCO operation on Groote Eiland, Australia, following structural damage to the wharf due to Tropical Cyclone Megan.

A strong El Niño season is usually accompanied by dry and hot weather in the Northern Territory of Australia. However, due to higher-than-expected water temperatures, Tropical Cyclone Megan reached category 3 storm status.

Australia has three operating manganese mines, which account for 13% of global seaborne trade, making the country the third largest manganese-producing country in the world. The largest, high-grade deposit in Australia is located on Groote Eiland, off the coast of the Northern Territory, where South 32 operates its GEMCO mine. The main mining area with annual saleable production capacity of around 5.5Mtpy is expected to reach its end-of-life in 2028, while exploration continues in the southern lease for potential expansion of the mineral resource.

Manganese ore prices have remained flat since December 2023, with premiums for high-grade ore staying below 15%. In January, producers like South32 and UMK revised their 2024 production forecasts downward due to persistently high Chinese port stocks and subdued steel production in China. The cyclone in late March compelled South32 to place GEMCO under care and maintenance for an unknown period. This situation may prompt ore producers, including Eramet and Jupiter Mines, who had been intending to boost future production, to expedite their plans to mitigate the potential shortfall.

It remains to be seen how the closure of GEMCO will impact ore prices. Australian ore prices, as reported by Asian Metal, usually trade at a slight premium to Gabonese material, however, this premium gap has been shrinking. Australian material includes ores from Butcherbird (which has offtake with OM Holdings) and Woodie Woodie (which sends material to owner TMI’s plants in China) – although both see the majority shipped via long-term contracts and likely not sold on spot. South African material, which trades at a discount to both Gabonese and Australian material, could be in for some upside if spot demand increases due to the impact of GEMCO’s suspension.