Japan Accepts 310% Hike for Mn Ore for F2008

Nippon Steel and Japanese leading ferroalloy maker, Nippon Denko agreed on Thursday with BHP Billiton to increase the manganese ore purchase price to 4.1 times for fiscal 2008 shipment from previous year. The price increases for the first time in 3 years under very tight supply. The price is 2.8 times of former record in fiscal 2005. The higher ore price will push up the ferroalloy price. The inevitable additive for steel making increases the cost by more than 100 billion yen for Japanese steel industry.

The new price is FOB US$ 11.2 per unit, which represents US$ 526 per tonne for ore with 47% manganese, for fiscal 2008 increasing by US$ 8.5 from fiscal 2007. The price jumped after the drop by 10% in fiscal 2007 and by 25% in fiscal 2006 from recent peak of US$ 3.99 per unit in fiscal 2005.

Worldwide manganese ore supply is very tight when world raw steel output continues to increase and Vale of Brazil reduced the output by 27% in January-September 2007 from same period of 2006 to increase the iron ore output. The tight supply already pushed the shorter term price when the buyers in China, which is the largest importer of the ore with around 6 million tonnes per year, purchase the ore at CIF US$ 10 per unit for January-March.

International manganese ferroalloy market already reflects the higher ore price. The ferroalloy price jumps to US$ 2,000 per tonne level compared with around US$ 800 a year earlier when electricity shortage impacted on the production in South Africa and China. The market is expected to increase more.

Japan imports around 1 million tonnes per year of manganese ore. The higher contract price could increase the cost by more than 40 billion yen. Japan imports more than 500,000 tonnes of manganese ferroalloy including silicomanganese in 2007. With current spot price, the ferroalloy cost would increase by more than 60 billion yen per year for the steel industry.