China Domestic Manganese Ore

— How does it impact China manganese industry?

June 2010
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Content

China Domestic Mn Ore Market Overview

Domestic Mn Ore VS Import Mn Ore

China Mn Equivalence & Expectation

What SMM Can Do?

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China Mn ore basic reserve reached 234 mil tons, 85% centralized in
Guangxi, Hunan, Guizhou, Chongqing and Liaoning.
China Mn Ore Basic Reserve and Distribution

Unit: mil tons

Others
15%
550+ Resource
Guangxi
Liaoning
34%
6%
Reserve
Chongqing
8%

234 Basic Reserve

Guizhou
11%
Hunan
26%
Source: NBSC, SMM

• According to NBSC, China total Mn basic reserve is 234 mil tons, among them, Guangxi, Hunan, Guizhou and
Chongqing in southwest China and Liaoning in northeast China own basic reserve of 199 mil tons, 85% of
national total.
• As investigated by SMM, there are over 550 mil tons as resource, which shows great potential for future
exploitation.
Note: Mn ore reserve in China is divided into basic reserve and resource based on different exploration level. Basic
reserve refers to more exact and minable quantity.
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Mn Mine centralized in southwest China. Mn Carbonate is the main ore

type and Mn content is low
China Main Mn Mine Distribution
Mn Mine
Chaoyang, Liaoning
Mn Ore Type
Grade Range Mn Carbonate/ Mn Oxide
15-17%/20-30%

Zunyi, Guizhou “Mn Triangle”

Mn Carbonate/ Mn Oxide Mn Carbonate
15-17%/ 20-30% 15-20%

Wenshan, Yunnan Southwest Guangxi

Mn Carbonate Mn Carbonate/ Mn Oxide
16-20% 16-18%/>30%

• Mn carbonate is the main ore type in China, accounting for about 73% of total. The left mainly are Mn oxide ore.
• China Mn ore grade is low. For Mn carbonate ore and Mn oxide ore, the average grade is only 17-18% and 23-
24% respectively.
Note: 1. “Mn Triangle” refers to three counties with rich manganese ore reserve, Huayuai County in Hunan, Xiushan
County in Chongqing and Songtao County in Guizhou.
2. “Southwest Guangxi” refers to Daxin County, Tiandeng County and Jinxi County located in southwest Guangxi
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Underground mining is the main exploitation mode in China.

China Mn Mine Exploitation Mode

Example
Open- Daxin, Guangxi
pit,
20%

Under-
ground,
80%
Example
Huayuan, Hunan

Source: SMM

• Due to China Mn mine mainly are marine deposit type which located in deep underground, Underground mining
is the main exploitation mode in China, accounting for about 80% of the total production.
• In Guangxi, Yunnan and Fujian, there are still some open-pit mines.
• China Mn mining is primitive, for most mines are small ones (annual production below 100 thousand tons) with
poor mining facilities.
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Exploitation Flow Comparison

Small Underground Mine Large Underground Mine Large Open-pit Mine
(50-80 kt/yr) (150-200 kt/yr) (>300 kt/yr)

Mining Pit

Mine to
Transshipment Center

Transshipment Center
/ Concentration

Transshipment Center
to Downstream
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China Mn ore production has enjoyed a double digital growth since 2006.
2006-2009 Mn Ore Production 2009 Mn Ore Production by Main Province
Unit: million tons

25 40% Guangxi
19%
20
30%

15
Others
20%
44%
10
Hunan
10% 18%
5

0 0%
Chongqin
2006 2007 2008 2009 Guizhou g
Domestic Mn Ore Production Production Growth Rate 9% 10%

Source: SMM Source: SMM

• Since 2006, along with the development of steel industry (Mn main downstream industry), China domestic Mn ore
production has enjoyed a double digital growth.
• The same as Mn ore reserve distribution, the Top4 Mn ore production provinces are Guangxi, Hunan, Chongqing
and Guizhou, accounting for 56% of total production. The production ratio of top4 provinces is less than its
reserve ratio, mainly for some reserves in these provinces have not been fully exploited.
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Electrolytic Mn and Mn alloy are the main application of China domestic

Mn ore.

China Domestic Mn Ore Downstream • Electrolytic Mn, Mn alloy are

Unit: million tons main applications of China
domestic Mn ore, whose
combined share reaches 91% in
2009
2009 53% 38% 9%

• Since 2007, China domestic Mn

ore demand has increased with
CAGR at 14% , mainly from the
electrolytic Mn industry.
2008 51% 39% 9%
• Others refer to
• EMD
• NMD
• Manganate
• etc
2007 51% 39% 9%

0 5 10 15 20 25
Electrolyic Mn Mn Alloy Others
Source: SMM
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Content

China Domestic Mn Ore Market Overview

Domestic Mn Ore VS Import Mn Ore

China Mn Equivalence & Expectation

What SMM Can Do?

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Domestic Mn ore can not meet demand, and the gap was increasing.
China Mn Ore Demand Structure, 2005-2009
Unit: mill tons CAGR
35
Total 18.9%
30

25
Import 20.2%

20

15

10 Domestic 18.4%

0
2005 2006 2007 2008 2009
Domestic ore Import ore
Source: SMM, China Customs

• Although domestic supply of Mn ores keeps growing, it can not satisfy rapidly increasing demand.
• Especially for Mn ores with high grade (over 30%), domestic supply is seriously in short due to limited rich
reserve in China.
• As a result, import Mn ores enjoyed a faster growth rate to feed domestic demand during the past five years.
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Import Mn Ore competes with domestic Mn ore in manganese alloy

industry.
Raw Material Structure of Mn Alloy Import Mn Ore Destination
Mn Alloy Plant
Concentration Area

53%

Tianjin Port

47%

Qinzhou Port Zhanjiang Port

Domestic ore Import ore

Source: SMM Source: SMM

• Import Mn ore competes with domestic Mn ore in Mn alloy industry, as about 97% of import Mn ore are used in
manganese alloy industry in China, accounting for 53% of total Mn ore consumption in Mn alloy industy.
• Since China Mn alloy plants are concentrated in Southwest and North China, more than 75% of import ore are
from Customs of Guangxi, Guangdong and Tianjin.
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Domestic ore and import ore are mixed as feedstock in manganese alloy
production to minimize cost.
Ore Proportion of Sample Manganese alloy plants, 2009
Mn alloy plant,
Province
Domestic ore/ Import ore Plant 3, Jilin
Domestic ore/ Import ore
35%/65%

Plant 1, Inner
Mongolia Plant 4, Liaoning
Domestic ore/ Import ore Domestic ore/ Import ore
40%/ 60% 20%/80%

Plant 2, Guizhou Plant 5, Guangxi

Domestic ore/ Import ore Domestic ore/ Import ore
35%/ 65% 20%/80%

• Most China Mn alloy producers used both import ore and domestic ore to minimize cost.
• For different Mn alloy plants, their ore mixing ratio is different for their own cost consideration.
• For a Mn alloy plant, its ore mixing ratio changes with Mn ore price variance.
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SiMn cost structure: Mn ore and power account for nearly 80% of total cost.

Typical Cost Structure of SiMn

Unit: CNY/ton

Determined by Mn ore grade,

Mn ore unit cost and technology
21%

26% Determined by power

Power consumption and price
100% Total
Cost
53%
Other costs refer to other
Others materials including coke, silica,
salary, management,
Total Others Power Mn Ore depreciation and amortization.

Source: SMM

• Since the cost of Mn ore and power account for nearly 80% of SiMn production cost, the fluctuations of Mn
ore prices and power prices have a significant impact on the manganese alloy industry.
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Negative correlation between Mn ore grade and power & Mn ore

consumption.
Correlation between Mn Ore Grade and Power & Mn Ore Consumption

Mn Ore Grade Power & Mn Ore Consumption

• There is a negative correlation between Mn ore grade and power & Mn ore consumption in Mn alloy production.
• With higher grade Mn ore, it consumes less Mn ore and electricity to produce Mn alloy, which attracting alloy
producers to use high grade Mn ore.
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While “higher grade, higher price” .

Mn Ore Price, May 31st, 2010
Unit: CNY/mtu
80

70
70 66

61
60

50
50
45

40
Mn28% 　Mn37.55% Mn38% Mn46% Mn49%

Domestic ore Import Ore

Source: SMM

• The higher Mn ore grade is, the higher Mn ore price.

• Usually, the grade of import ore is higher than domestic ore, which cause the price of import Mn ore is much
higher than domestic Mn ore.
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There is a balance between Mn ore cost and power cost, which cause
mixed feedstock to be most China Mn alloy producer’s choice.
SiMn Cost Scenario Analysis • Three cases are assumed to better
Unit: CNY/ton understand the interaction between Mn ore
cost and electricity cost.
9000
Average Domestic or Import
7500 21% 21% grade Ore
21%
Case 1 28% Domestic ore
6000 20%
30% 26% Case 2 32% D&I (40%&60%)

4500 Case 3 44% Import Ore

• Case 2 (using both domestic ores and

3000
59% imported ore) is the most economic choice
52% compared with the other 2 cases.
49% • Generally in China, economic Mn ore grade
1500
fluctuates from 28 to 38, determined by
different Mn ore purchasing prices, logistic
0 cost and power prices.
Case One Case Two Case Three
Mn Ore Power Others

Source: SMM
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Content

China Domestic Mn Ore Market Overview

Domestic Mn Ore VS Import Mn Ore

China Mn Equivalence & Expectation

What SMM Can Do?

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China consumed about 7.1 mil tons Mn in 2009, about 93% used in steel industry

2009 China Mn Equivalence Chain

100% 97%/54% 96%/84%
Import Mn Ore Mn Alloy Steel

2%/3%
Export

1%/38% 0%/3%
Electrolytic Mn Mn3O4

0%/2%
Others 1

100% 2%/5%
Domestic Mn Ore Others 2

0%/3%
EMD Batteries

Import Ratio/Domestic Ratio

Source: SMM
• Total China Mn consumption in 2009 was 7.1 mil tons (Excluding export), among them, about 93% consumed in
steel industry (Including 96% of import Mn and 84% of domestic Mn).
• Although China domestic Mn ore production was much more than import Mn ore, its Mn content was less than
import due to the poor Mn grade.
Note: 1. Others 1 stands for high-purity manganate, electric welding rod etc.
2. Others 2 stands for manganate, NMD, etc.
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Production of crude steel is estimated to grow with a decreasing growth

rate.
Production of Crude Steel and Average Annual Growth Rate (AAGR), 2007-2012E
Unit: Million ton
13.7% 15.1%
15.7% 11.9%
7.7%

2.0%

2007 2008 2009 2010E 2011E 2012E

Source: NBS, SMM Production AAGR

• In 2009, the AAGR of crude steel production bounces back to 14%, mainly driven by China domestic demand from
construction, automobile, etc.
• While the crude steel output is estimated to grow with a decreasing growth rate in next few years.
• With the crude steel production growth decreasing, it is expected that China Mn demand will increase but with
decreasing growth rate.
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Content

China Domestic Mn Ore Market Overview

Domestic Mn Ore VS Import Mn Ore

China Mn Equivalence & Expectation

What SMM Can Do?

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Introduction of SMM

¾ SMM- Shanghai Metals Market, is the leading integrated service provider

in China non-ferrous metal market, with daily average rate of hits is as
high as 15,000,000, which ranks the leading position in non-ferrous
metal’s website in the world.

¾ SMM owns more than 50, 000 registers and over 30, 000 subscribers
from more than 130 countries and areas. We have a strong research team
with professional experts coming from various industries. Many of them
even have more than 40 years' non-ferrous metals industry experience.

¾ - SMM publishes the "Shanghai Nonferrous Metals Price Index (SMMI)"

everyday, which is the benchmark price on the spot market, and reflects
the overall situation of the industry.

Daily Online Market Industry Analysis Consulting Business

Information Intelligence Statistics Reports Case Study Opportunity
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Introduction of SMM
Key Account

Consulting Research

Working with individual Generating information

clients to resolve tough and insights for multiple
issues and help implement clients through syndicated
solutions research
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http://Mn2010.cbichina.com
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Questions?