A significant 200% surge in manganese ore prices in the last 34 months has
sent alarm bells ringing across the domestic ferro alloys sector. The latter is a key input for
steel makers but 70% of the industry has become import dependent as few new mines have come up in the recent past. The development
has worried steel companies, too, since each tonne of steel contains about 6 kg of manganese alloys. To add to the worries, coke prices
have also surged by 80% in same period. The proposed imposition of an antidumping duty of $25 tonne on coke is likely to aggravate the
situation further.
However, in the face of soaring input costs, price of Ferro alloys has increased by only around 30%. This has led to a situation where a
number of smaller Ferro alloys units have either close down or are on the verge of being shut down with fears of sizeable job losses of
nearly a few lakhs. With an installed capacity of 3.5 million tonne, manganese alloys industry is currently operating at 70% capacity. While
domestic sales are 1.5 million tonne, the exports amount to around one million tonne.
The industry is encountering large scale imports of manganese alloys from Malaysia, which has emerged as a big challenge with low
power cost allowing it to set up large capacity ."Under the Free Trade Agreement (FTA), Malaysia's products have been coming in as duty
free, making it difficult for Indian producers to compete in the local market. We would urge the government to consider imposing safeguard
duty on it," S C Agarwalla, managing director, Maithon Alloys said. The firm, one of the larger domestic players, said it has been forced to
cut production at two of its three units due to 'adverse market conditions'.
Stateowned Manganese Ore India Ltd (MOIL) is a key player with a sizeable presence in Chhatisgarh. The depletion of reserves at
manganese mines in Odisha, opening of few new mines in last few years and prevalence of lowgrade ore in existing mines have adversly
affected domestic producers. In contrast, companies in South Africa, Ukraine, Australia, Brazil and Europe have captive ore mines and
they export manganese ore as well. These companies sell ore at high prices and ferro alloys at low prices to increase market share
globally.
"The local Ferro alloys industry is highly fragmented leaving it with no real pricing power even in the wake of manganese ore prices
spiralling to Rs 21,000 from Rs 7,000per tonne since July this year," an analyst said. With its main customerthe steel industryunder
financial strain, ferro alloys makers have also had to provide them extended credit period.
Recently, a tender floated by Steel Authority of India Limited failed to evoke any response from domestic ferro alloy producers. Uncertainty
over prices and input costs is being attributed as the main reason for this.