Battery-grade manganese deficit expected by 2027 as weak prices stall newcomers

Battery-makers want to mix increasing amounts of high-purity manganese sulfate into their chemistries, but prices are currently low for the metal and that could stunt project development and lead to a shortage down the road, experts and analysts told S&P Global Commodity Insights.

The highly refined form of manganese metal could increase the performance of lithium-iron-phosphate (LFP) and nickel-manganese-cobalt (NMC) batteries used in electric vehicles, and using it allows manufacturers to reduce cobalt and nickel content for significant savings. However, while manganese ore is abundant, processing is dominated by China, as with many battery metals.

A small group of developers is working to get high-purity manganese projects off the ground in the US, with help from Inflation Reduction Act incentives and growing demand for domestic supply by automakers in North America and Europe. But recent weakness in prices due to a slight surplus of Chinese supply, along with a host of uncertainties around battery chemistry trends and EV demand, could stall investment, according to Andrew Zemek, special adviser to the CPM Group, a US-based commodity research firm.

"It's a global market, and at the moment there isn't much possibility to buy from elsewhere but China," Zemek said in an interview. "That's why we are having the low prices. And this is putting everybody into slumber because they say, 'Prices are low, the stuff is plentiful, no need to worry' and not seeing what's just around the corner."

S&P Global Platts assessed China's battery-grade manganese sulfate spot price on a delivered-duty-paid (DDP) basis at $801 per metric ton on July 12, well below the same-day price of $4,738/t for nickel sulfate DDP China and $6,400/t for 20.5% Co cobalt sulfate CIF North Asia.

Zemek projects a global supply deficit by 2027 even if all the announced manganese projects outside of China meet their ambitious targets. A massive project by China's Ningxia Tianyuan Manganese Industry Co. Ltd. could sharply increase global supply, but battery-makers will be wary of the feedstock's selenium content, which can impact battery efficiency, Zemek said.

Changing battery chemistries

Changing battery chemistries would impact manganese sulfate demand in the 2026–2028 time frame, said Justin Brown, managing director of Australian mining company Element 25 Ltd. The company plans to ship manganese ore from its Butcherbird mine in Western Australia for processing in Louisiana.

"It's not today, but we're starting to look more towards that future," Brown said. "That will have a significant impact on requirements in the manganese sulfate industry."

Battery-makers have experimented with higher manganese content in both NMC and LFP chemistries.

In 2018, German chemical giant BASF SE introduced an NMC battery that increased manganese to 70% and cut cobalt to less than 5%. In February, European chemical-maker Umicore SA introduced a high-lithium, manganese cathode that promises batteries with better total cost of ownership, longer driving range and better recyclability. Zemek said CPM understands that the Umicore cathode uses up to 60% manganese.

Top Chinese battery-maker Contemporary Amperex Technology Co. Ltd. is adding manganese to LFP batteries to create LMFP chemistries, with first commercial production expected in 2023. Zemek projects LMFP batteries will comprise about 45% of all LFP batteries by 2031. Adding manganese to LFP batteries allows for higher energy density and longer range at a similar cost, while downsides include shorter life cycle and weaker charging capacity.

ESG selling points

While manganese is one of the most abundant elements on the planet, only about 1% of manganese supply is suitable for battery applications, said Gary Lewis, group CEO for Electric Metals (USA) Ltd., formerly Nevada Silver Corp. The developer is conducting test drilling for manganese at its Emily mine in Minnesota.

"The global battery industry is seeing a significant shift towards high-purity manganese sulfate as a key component in advanced batteries, driven by concerns over cobalt price instability and ethical issues, and emerging battery chemistries," Lewis said in an email interview. New chemistries are gaining traction for lower cost and improved energy density, Lewis added.

EV-makers have been trying to cut their reliance on Congo, by far the world's largest producer of cobalt, because of its history of human rights violations, political instability and armed clashes.

The small group of manganese developers is leaning hard on environmental, social and governance credentials to attract investment as US and European automakers adopt critical mineral passports in response to consumer demand for more proof of environmentally and ethically sound supply chains.

Element 25 stresses its low carbon intensity and location in Australia, as US and European governments have been promoting supply chains outside of China, Brown said.

"We fit very nicely into the strategic ambitions of the [US] administration with respect to the [Inflation Reduction Act] and how they're trying to build up the supply chain," Brown said.

New projects, no cash

Manganese developers know they have a ready market, but with the surplus in China, they are struggling to secure crucial investment.

Element 25 announced off-take deals with US automaker General Motors Co. and European automaker Stellantis NV earlier this year. The deals represent a combined 65% of phase-one production at the company's plant in Louisiana, which is scheduled to start in 2025, Brown said.

"The mine can feed 10 of these plants," Brown said. "We're just constrained by capital, locating sites, locating partners to fund it, off-take partners who want to consume the product. There's no limit on the resource side, which is obviously a big plus. ... For us, it's about sourcing the capital to build the conversion capacity so we can actually build the product."

Electric Metals is targeting net-zero carbon output through renewable power, battery-powered mining and low-carbon processing, Lewis said.

Euro Manganese Inc. is targeting annual production of 49,000 metric tons of high-purity manganese at its Chvaletice plant by recycling old tailings from a decommissioned mine. The company plans to make a final investment decision after the first phase of development, it said June 30, after awarding an engineering, procurement and construction management contract.

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