Manganese Market Outlook with CPM Group

Decline in Steel Production

Zemek kicks the interview off with a reminder that for now, the fortunes if the manganese market are very much tied to the steel market, with 94% of manganese mined in 2022 was used for steel production. Steel production since the pandemic and economic downturn has led to “nearly 19 straight months of steel production declines which is much longer than during the global financial crisis of 2008-2009″. Although we have started to see an uptick in production throughout June and July, in particular from China, we are still negative 0.1% in steel production for the first 7 months of 2023. This has resulting in less production of manganese ore, down 2%, which Zemek argues should be down further as stockpiles risk growing too high. The production of Electrolytic Manganese Metal (EMM) is labelled a “disaster” down 40%. This has resulted in shifts in demand with some steel makers preferring to use manganese ferro alloys rather than EMM as it is cheaper due to less Mn content and requiring less processing.

Shifts in the Battery Sector

Noting that the metallurgical manganese used in steel production is a completely different market to the high purity manganese used in batteries, there is a separate reason for poor price performance related to battery grade material. Primarily demand for NMC batteries in China. Since the withdrawal of subsidies in China for higher energy density batteries, mainly of the NMC type, many producers shifted to LFP batteries, which currently does not require manganese. However, this is changing with the introduction of LMFP batteries. Zemek noted, “LMFP batteries, are much more powerful, with about 20% more energy density than the traditional old-style LFPs”. Although LMFP batteries are said to be “tomorrow’s battery”, Zemek argues that this shift does indicate a potential surge in demand moving forward. That said, we may be waiting a while as commercial production of LMFPs has not yet started, Zemek expects first production in 2023. Zemek also predicts that “LMFP batteries with manganese will account for something like 50% of all LFP type batteries by 2032”.

Price

The price of manganese metal for metallurgical (steel production) purposes is at around US$2,000/T in Rotterdam, “a far cry from $7,500/T we had in 2021/2022. The average for 2022 was around $4,500/T. The price of chemical, High Purity Manganese Sulphate Monohydrate (HPMSM) is “close to the floor, and to the Chinese cost of production or even below that now” at US$730/T. Down from nearly $1,700/T a year ago.

Zemek notes that this low price is troubling as he expects it to delay investments/financing of development projects in the pipeline. As a result, 5 years down the line we will have less manganese available than previously thought, plus demand will be larger than previously thought.

Interestingly, this downturn in manganese pricing is not unique to this battery metal in particular. Zemek shows the downward correlation between Ni and Co prices, even though these metals come from different counties. Zemek mainly sees the shift to LFP chemistries as the reasoning behind the price reductions, as LFP also do not use Ni or Co.

China’s Production Dominance

Discussing China’s role in the global manganese market, Zemek notes both its current status and future prospects. He observes, “by 2032, China rather than being the supplier of the world may turn into a net importer”. This statement underscores the potential shift in China’s position from a key global supplier to possibly a major importer, due to internal demand and challenges in scaling up production sustainably.

The Risk of Overreliance and the Pursuit of Alternatives

The global market’s overreliance on China for manganese supply is a persistent risk. It’s a situation that Europe and the US are actively seeking to mitigate by strengthening their own battery supply chains. For instance, the US introduced the Inflation Reduction Act, requiring a significant portion of critical minerals in EV batteries to come from North America or allied countries by 2024. This move aims to reduce dependency on Chinese supplies. European regulations, such as the EU’s Critical Minerals Act, aim to reduce single-country dependencies for critical materials like manganese. Such policies could spur the development of manganese resources outside China, adding a new layer of complexity to the market.

Outlook through to 2023

Andrew’s final conclusions relay “no fireworks here” in regard to the manganese market related to the steel industry. The next 10 years of steel growth is predicted to be a compound rate of 0.7% main due to a wavering construction sector in China, coupled with worsening credit availability.

There is a much more interesting environment within the battery sub sector with a story of two halves. Right now we are in a surplus situation and are likely to remain in a surplus situation for the next two – three years. From 2027 – 2028 Zemek predicts a “definite shift into deficit”, even if all of the manganese projects in the pipeline go ahead without delay. By 2032 this deficit will be significant, to satisfy demand the production of HIGH PURITY manganese needs to grow 9.5x, whereas current estimates are that the production response can only reach 5.5x.