Manganese prices, up 50% since the end of March, are approaching their 2022 record – Eramet is taking advantage of this on the stock market

Manganese prices, up 50% since the end of March, are approaching their 2022 record – Eramet is taking advantage of this on the stock market
Manganese prices, up 50% since the end of March, are approaching their 2022 record – Eramet is taking advantage of this on the stock market

“The planets are finally aligned for Eramet”, notes Oddo BHF. The private bank, through the voice of analyst Maxime Kogge, today raises its price target from 109 to 157 euros, reiterating its advice of “outperformance” on the mining company, which mainly produces manganese (60% of its turnover) and nickel. This metals specialist argues “the combination of well-oriented prices and exchange rates, increasing production and well-controlled costs. »

Manganese prices have been soaring for almost two months and the forced shutdown, at the end of March, of the Groote Eylandt mine in northern Australia, which belongs to Gemco, a subsidiary of South32, the world’s number two in this ore used for the manufacture of carbon steel. One ton of carbon steel consumes around 10 to 12 kg of manganese. It increases the strength of steel and prevents cracking, which is essential for rebar used in seismic zones.

Tropical Cyclone Megan severely damaged a bridge connecting the Groote Eylandt mine, located on a small island, to the processing plant, as well as port infrastructure.

“Manganese prices are currently above $6 per dry metric ton, close to the levels reached in February 2022 when Eramet itself experienced incidents”observes Maxime Kogge. “The rally accelerated with South32’s announcement in April that it would not be able to return to a normal rate of production until at least the first quarter of 2025. » The Oddo BHF analyst estimates that the ore could exceed $7, or even approach the record of $8 reached in 2022.

The 8 dollars in sight, according to Oddo and Bank of America

Eramet and South32 are the two dominant players in high-grade ore with market shares of 33% and 29% respectively, far ahead of other competitors in Gabon and Brazil. The largest manganese mine in the world is that of Comilog, a subsidiary of Eramet. It is located in Gabon.

High grade ore cannot be substituted with medium grade ore unless more reducing agents and electricity are used.

Oddo BHF raises its average manganese price scenario for the whole of this year to $5.76 (compared to $4.5 previously) and to $5.13 for 2025. It is then expected to fall to $4.5 in 2026 with the return of Gemco production and still mixed demand for steel in China.

On Friday, Bank of America Securities already raised its manganese price forecasts by more than 50% for 2024, to $6.45 (including an average of $8 in the second half, x2 over one year) while « 10% of the high quality and low price offer [est] out of service “. Analyst Jason Fairclough from the American bank also revised his hypothesis for 2025: +22% to $5.09.

The marginal tonne of South Africa very “sensitive” to price

South Africa has the world’s largest reserves of manganese, exploited by local companies, Anglo American and South32. However, we explain at Bank of America, it is necessary that “prices become high enough to encourage marginal tonnes from [de ce pays]. [Elles sont] price sensitive [puisqu’elles] are generally transported by truck rather than by train (due to rail constraints)and might need a price of $7 to $9, compared to $4 to $5 for ore transported by train. »

Analyst Jason Fairclough, who advises buying Eramet on the stock market, also raised his price target from 90 to 120 euros on Friday. The French company’s shares, at their highest level in just over a year, have already rebounded by 46% since the start of the year. They returned to the threshold of 100 euros on Friday.

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