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Manganese sulfate bottleneck looms over US, European EV manufacturers


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Manganese sulfate bottleneck looms over US, European EV manufacturers

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Manganese ore stockpiled at a harbor loading site in Port Hedland, in Western Australia's Pilbara region.
Source: CUHRIG/E+ via Getty Images

China's control of global manganese processing capacity could lead to a supply bottleneck for U.S. and European battery-makers by 2030.

High-purity manganese sulfate has been an overlooked battery metal as its abundance and wide geographical distribution have kept prices low. But growing popularity of nickel-manganese-cobalt, or NMC, and similar battery chemistries will drive up demand for the metal and could send prices up with it. Demand for battery-grade manganese is expected to increase by 15 times from 2020 to 2031 to 1.2 million tonnes per year, according to the Battery Solutions division of E Source, a utilities research firm.

While manganese ore can be found in several countries around the world, China holds around 90% of global refining capacity, according to E Source, giving it a stranglehold on the processed high-purity or electrolytic manganese. While the U.S. and European Union scramble to build their own processing capacity, U.S. and EU battery-makers face the prospect of higher prices as demand increases and China controls supply.

"Where will the high-purity manganese be coming from for the North American and for the European battery industries?" asked Sam Jaffe, vice president of Battery Solutions at E Source. "Are they just simply going to ship the metals or the sulfates from China? ... That's not a very efficient way of doing it or a cheap way of doing it."

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Limited refining capacity will hit industry

Manganese prices have generally not been a major factor in the overall cost of batteries, and in recent months the price of high-purity manganese sulfate in China has been steady at between $800 per tonne and $900/t. The low price has led to the industry underestimating the importance of manganese in battery cathodes and the need for refining capacity outside China.

U.S.-based commodities research firm CPM Group said the true price of battery-grade manganese sulfate in Europe is around $2,400/t when taking into account purity levels, sustainability measures and freight. CPM Group expects the price to double to around $5,000/t by 2035.

"Manganese is now becoming more of a concern for the [original equipment manufacturers]," said Matthew James, CEO of Euro Manganese Inc. The company is focused on the Chvaletice project in the Czech Republic, the only high-purity manganese project under development in the EU.

"There's plenty of manganese out there, that is not a problem," James said. "But if you want a local source of supply of high-purity manganese, there aren't that many options out there."

China has been building its refining capacity to meet expected demand. But some of these refineries rely on chemical processes that are highly polluting and may not be palatable to carmakers focused on environmental, social and governance issues.

There are only two refineries outside China in operation, one owned by Nippon Denko Co. Ltd. in Japan and another owned by Vibrantz Technologies Inc. in Belgium. Euro Manganese, South32 Ltd., Giyani Metals Corp., Element 25 Ltd. and Canadian Manganese Co. Inc. are developing projects outside of China, but production is years away.

Bringing production closer to home may not lower costs much for U.S. and EU carmakers as both regions have tougher environmental and labor requirements than China. James said Euro Manganese's Chvaletice development is targeting initial production of 50,000 tonnes per year, with initial capital expenditures estimated at $757.3 million, and that demand will be far higher.

"The shift in the manufacturing of batteries away from China to jurisdictions such as the EU and the USA should result in an increase in the cost of delivering manganese sulfate which will put upward pressures on price," said Justin Brown, managing director for Element 25, which is developing the Butcherbird high-purity manganese project in Australia.

"We are also seeing increased demand for ESG-compliant, low-carbon, ethically sourced manganese [that] will make the supply/demand balance tighter, which should support prices," Brown said.

NMC batteries to dominate

The International Energy Agency forecast in its flagship 2021 critical minerals report that NMC compositions will be the dominant battery chemistry in the electric vehicle industry, making up around 80% of the drivetrains in passenger vehicles by 2030.

"Battery demand, however, will reshape the manganese chemical industry, which is expected to become the main bottleneck for manganese demand," said Aloys d'Harambure. D'Harambure is executive director of the International Manganese Institute, a global organization representing more than 100 manganese companies.

The institute is increasingly being contacted by battery producers in Korea, the U.S., Europe and other countries that want to find non-Chinese suppliers of high-purity manganese sulfate, d'Harambure said.

Carmakers prefer NMC chemistries because of the high power capacity and energy density despite safety concerns and a short life cycle. General Motors Co., Ford Motor Co., Toyota Industries Corp., Volkswagen AG, Tesla Inc. and others have all adopted NMC chemistries, with the most notable vehicles on the market being the Chevy Bolt and BMW i3.

The industry is also closely watching developments in alternative battery chemistries such as solid-state and lithium-nickel-manganese oxide compositions, which both require manganese, but it is too early to say if they will be successful.

Many car manufacturers are looking to lower or remove the cobalt in their NMC cathodes to avoid human rights and labor concerns in Congo, which controls much of the world's economically accessible cobalt. Those new chemistries use even more manganese, and a shift will only exacerbate the anticipated bottleneck.

A 2021 report by the White House predicted that manganese may emerge as a preferred element in battery cells through 2040 given the metal's low cost, abundance and safety.

"A number of car manufacturers and battery producers are really counting on manganese-rich cathodes to come into play, which we don't really have yet, but we expect them to start being produced in the 2024-2025 time period," Jaffe said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.