China's HBIS Lowers August Manganese Alloy Tender Prices Amid Weaker Steel Demand

Chinese state-owned steel giant Hebei Iron and Steel (HBIS) has reduced its manganese alloy tender prices for August, reflecting a softening steel market and ample supply of the alloy. This price adjustment comes as the steel industry faces ongoing challenges, including reduced demand and a slowdown in construction projects.

For August deliveries, HBIS cut the tender price for 5,800 metric tons of high-carbon ferro-manganese (65% grade) to 5,800 yuan per ton ($813 per ton), a decrease of 800 yuan per ton from July. Additionally, the company launched a second round of provisional tender prices for silico-manganese (65/17 grade alloy) at 6,150 yuan per ton, slightly up by 50 yuan from the first provisional price but still down by 1,500 yuan from July.

The decision to lower prices was influenced by the abundance of spot supplies in the manganese alloy market, attributed to higher operating rates at alloy plants and diminished steel demand. Despite this, some alloy producers have maintained their prices due to rising ore feedstock costs, which have squeezed their profit margins. Many smelters reported that their production costs exceeded 6,300 yuan per ton, even after using lower-cost, non-mainstream ore feedstock imported from countries like Ghana, Myanmar, and Malaysia.

The reduction in tender prices also mirrors a broader trend in China's steel industry, where output has been cut in response to declining demand and financial losses. In July, China’s total steel output dropped by 8.7% year-on-year to 82.9 million tons, according to data from the National Bureau of Statistics (NBS). The downturn in steel production is further exacerbated by weak demand in the construction sector, which has been sluggish due to a lack of new infrastructure projects and a struggling real estate market.

Investment in China's real estate sector, which accounts for roughly 40% of the country’s steel demand, fell by 10% year-on-year from January to July, according to NBS data. This downturn is reflected in the steel purchasing managers' index (PMI), which dropped by 5.3 points from June to 42.5 in July, marking a one-year low and signaling weak activity in the steel industry.

Overall, China's crude steel output fell by 2% year-on-year to 613.7 million tons in the first seven months of the year. The top five steel-producing provinces—Hebei, Jiangsu, Shandong, Liaoning, and Shanxi—saw their combined output fall by 14% year-on-year in July, accounting for just over half of the nation's total production.