Manganese ore and alloys
Manganese ore is mined by Assmang in the Black Rock area of the Northern Cape province and manganese alloys are produced at the Cato Ridge Works in KwaZulu-Natal (the Works). Cato Ridge Alloys, a joint venture between Assmang, Mizushima Ferroalloys Company Limited and Sumitomo Corporation Limited (both of Japan), produces refined ferromanganese by introducing oxygen through a lance into a converter which contains molten metal supplied by the Works, producing product with a reduced carbon content.
Ore-feed for the Works is sourced from Assmang’s manganese mines and the bulk of both ore and alloy production is exported. Sales tonnages of manganese ore and alloy for the year were as follows:
Manganese alloys are used in the production of steel. Demand for both manganese ore and alloy picked up during the year. For manganese ore the main importers were China and Asia. Imports of manganese ore into China were at record levels during the year and for the 12-month period under review amounted to 12,6 million tons. Prices recovered substantially from the very low levels that were reached at the bottom of the market in 2008, peaking at US$9,00 per manganese unit. However, towards the end of the period it was apparent that there was a substantial inventory build-up in China and there was reluctance from some buyers to commit to purchases. The availability of stock will negatively affect pricing going forward and both the large major western producers, and the new producers in countries such as Malaysia and Indonesia may have to adjust production levels, particularly if Chinese steel production continues to reduce.
Manganese alloy pricing reached its lowest point just before the end of the last financial year but recovered moderately during the period under review. As was the case with manganese ores, prices softened towards the end of the financial year, due to overproduction by some of the major alloy producers and a moderate decline in steel production. A structural change has occurred in the manganese alloys market, with China ceding its place as the largest global exporter to Ukraine, with the resultant removal of a substantial volume from the market.
This decrease in China’s export volume comes on the back of power cost increases, reduced availability of power, changes to environmental legislation, declining domestic ore grades and a 20% Chinese export duty. In 2008, Chinese manganese alloy exports were over 1,1 million tons, but in 2009 were less than 200 000 tons. This trend has continued into 2010 and the only alloy which is being exported at similar levels to 2008 is medium carbon ferromanganese.
The lower prices for financial year 2010 together with the stronger rand, resulted in the contribution to the headline earnings of Assore from this division falling to R739 million (2009: R1 963 million). Capex spent during the year for the Manganese Division was R743 million (2009: R854 million) of which R150 million was spent on rebuilding ferromanganese furnaces, with a further R46 million
spent on the conversion of a ferrochrome furnace to a ferromanganese furnace at the Machadodorp Works.