Graham Kerr. Picture: PUXLEY MAKGATHO
Graham Kerr. Picture: PUXLEY MAKGATHO

Diversified resources group South32 is reviewing options around it manganese alloy smelters in SA and Australia, potentially selling or closing the operations because of changing market conditions.

In a presentation to the Bank of America Merrill Lynch Global Metals, Mining & Steel conference,  South32 CEO Graham Kerr said the company was “reviewing options for our alloy smelters as changes in market dynamics have reduced the attractiveness of our exposure”.

South32 describes itself as the largest producer of manganese ore and a major source of manganese alloys, which is mainly used to make steel, giving it strength.

SA has installed manganese alloy making capacity of 1.2-million tonnes a year, but about 40% of this is used, according to a June 2018 document carried in the Journal of the Southern African Institute of Mining and Metallurgy. SA has 80% of the world’s known manganese resources.

The document noted more than 80% of SA’s manganese was exported as ore, with high electricity costs, a “lucrative export market for ore” and relatively stable manganese alloy prices meant the reduction of manganese alloy production.

Kerr gave no further details, but a South32 spokesman said the decision to review the assets came from the increasing production in China and India of ferromanganese to supply their steel mills and the higher output of cost-effective manganese smelting in Malaysia, which was closer to those markets.

“Over the next few months we will undertake an assessment of the options for each operation including divestment, care and maintenance, or closure. No final decision has been made on the way forward. We will provide a further update in October 2019,” a South32 spokesman said.

SA is by far the world’s leading source of manganese ore, but its smelting industry has been crippled largely by rampant increases in electricity costs forcing some companies like African Rainbow Minerals and Assore in their Assmang joint venture to construct a manganese alloy plant in Malaysia.

The Minerals Council of SA has said the price of electricity has increased by 523% for industrial users since 2006 and faced another 30% increase over the next three years.

This would not only lead to the closure of energy-intensive furnaces but prevent future investment in such plants, the council’s CEO Roger Baxter has said, noting this made the government’s demand for beneficiation or improving the value of SA’s mineral exports an unrealistic expectation.

For South32, the price increases were one of the contributing factors in a decision to reduce its smelting footprint to one furnace from four.

In South32’s Tasmanian manganese alloy business, Temco the operations needed an expensive upgrade to the elderly plants which are more than 50 years old.

Both operations employ about 300 people each. Metalloys in SA generated 79,000 tonnes of high- and medium-carbon ferromanganese in 2018 and Temco produced 165,000 tonnes of high-carbon ferromanganese, silicomanganese and sinter.

The underlying manganese operations in SA and Australia increased output by 10% to 5.5-million tonnes during 2018 with each country producing 2.15-million tonnes and 3.4-million tonnes respectively to take advantage of increased demand.

The manganese ore price averaged $6.88/tonne in 2018, up from $5.77/tonne the previous year. The price of manganese alloy increased by 16% to $1,342/tonne over the same period.

“The price increase was supported by positive demand growth and lower domestic ore production in China, amidst tightening environmental restrictions,” South32 said in its 2018 annual report referring to manganese ore.

It said the Western Europe spot high carbon ferromanganese price weakened 19% during financial year 2018 due to increased ferro alloy supply in the seaborne market. 

World manganese ore production increased by 13% during 2018 to 21-million tonnes, with Australia, Ghana, India and Brazil ramping up output. SA provides about a third of global manganese ore, according to the International Manganese Institute.​