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What’s going on here?
Silico-manganese futures in China have climbed to their highest mark in over six months, driven by tight manganese ore supplies and diminishing alloy inventories.
What does this mean?
Silico-manganese futures on the Zhengzhou Commodity Exchange have surged 7.49% to 7,292 yuan per metric ton, reaching levels not seen since July 2024. This rise stems from increased manganese ore costs and a significant depletion of stocks. The supply squeeze is exacerbated by halted shipments from South32's Groote Eylandt Mining Co in Australia due to a cyclone, further straining supply lines. As a result, open interest in these futures has jumped by 34% to 572,000 lots, indicating heightened market activity. Although South32 has resumed some operations, China's manganese ore inventories are at their lowest since July 2020, adding pressure on prices. Analysts suggest the trend may reverse as South32 increases shipments in the second quarter.
Why should I care?
For markets: Riding the scarcity wave.
The manganese market's current state highlights the volatility and opportunities in commodities trading. Supply chain disruptions have inflated prices, presenting potential short-term gains for investors in steel and related sectors. However, caution is warranted with expected increased manganese shipments potentially stabilizing prices soon.
The bigger picture: Commodities' shifting sands.
This situation emphasizes the fragile balance between supply chain vulnerabilities and market dynamics. Mining disruptions like South32's GEMCO incident ripple through global markets, underscoring the economic impacts of natural events and geopolitical shifts. Stakeholders need to stay agile to navigate these uncertainties effectively.