• Peter Gadsdon

Manganese Outlook, 5x world production deficit looming with CPM Group

Mining Network: “I've seen before that you have called manganese the forgotten battery metal, why is that?”

CPM Group: “Well because nobody talks about it. Now people talk about it but they haven't been talking about it for quite a long time and I don't know why? So, you know the 2000s were the decade of excitement about lithium then cobalt and nickel and even today if you go to various battery events, you will see lithium nickel cobalt mentioned on big boards but nothing about manganese and that's completely wrong as you are about to find out.”

Mining Network: “Why do you think to begin with manganese didn’t receive as much exposure? Obviously, I’m right in thinking that manganese has been part of the cathode mix since the beginning of lithium-ion batteries, right?”

CPM Group: “That's correct ever since the NMC technology first appeared on the market in 2008, manganese was very much a part of what I call the trinity of metals. Which gave the name to the ternary powders, so three metal powders and the abbreviation NMC stands for nickel, manganese, cobalt. In the early batteries, there are still many vehicles with these batteries driving around and we're still producing them the NMC one, one, one, the one, one, one, stands for one part nickel, one part manganese, one part cobalt. So, they were equal partners and yet nobody talked about manganese, and everybody talked about nickel and about cobalt and the reason for it is very simple. That's its price, or its cheapness should I say depending on the price relationship in at any given time, manganese is between 10 times and 47 times cheaper than cobalt so what is there to be excited about? That's why nobody talked about it before.”

Mining Network: “Why do you think cobalt in particular (obviously back in 2017 we did see a huge spike rally in cobalt) got more attention, than even at the time things like nickel and manganese?”

CPM Group: “Cobalt got all the attention for several reasons. One reason is high price volatility and if you look at the different graphs of cobalt you will see how it's jumping up and down and having peaks and troughs and so on. The second thing is its high prices that was the highest priced component of the NMC cathode. Cobalt could account for something like between 50%-%60 of the value of the cathode. Thirdly, because it comes from the Democratic Republic of Congo. At least today about 70% of cobalt comes from there. As we all know it is not the most stable country in the world. It's plagued by civil war, child labour, corruption and all the other ills of many African countries. So, the world EV industry, electric vehicle industry cannot afford to be just reliant on one single country with all these problems. So, that gave the engineers a lot of incentive to engineer cobalt out of batteries and they've been trying to do that for the best part of the last five or ten years.”

Mining Network: “Obviously, you're talking about this engineering out of cobalt, is that why manganese is getting into the limelight a bit more now? We are definitely hearing a lot more about manganese than we were even a year or two ago, what's the main causes of that?”

CPM Group: “That is correct. This technical drive to engineer cobalt out of batteries resulted in so-called cobalt free batteries. This is not a specifically technical correct term because some of them are still containing some cobalt but very minute quantities. This resulted in major car makers what I call voting for cobalt. So, we had Tesla first in September 2020. Elon Musk said it's relatively easy to produce a cathode with one third manganese and two-thirds nickel or something like that. Then in March 2021 we had Volkswagen having their big battery day and then they made a significant announcement, that they will be using manganese-based batteries for what they call their volume segment. So, majority of their electric vehicles would be using manganese-based batteries. Then in July this year we heard from Stellantis, for those of you who are not following closely the market announcement. Stellantis is a merger of Fiat Chrysler and the former PSA group containing many European well-known marks like Opel and on the on the other side of the Atlantic Jeep and Chrysler and so on. So, Stellantis is 14 brands on both sides of the Atlantic. Those three; Tesla, Volkswagen and Stellantis between them produce 16 million vehicles a year and all of them have major plans to go electric. Volkswagen says about 80% of their vehicles in Europe would be electric by 2030. Stellantis said 70% in Europe and 14% in America. Tesla is forever 100% electric, so we are talking about huge volumes of cars going electric and those makers of those cars, they are ‘voting’ for manganese. To be based on manganese batteries.”

Mining Network: “Well, obviously we're moving away from cobalt mainly because of the jurisdiction on the supply side of that market. Let's move into the supply side of manganese, is there a shortage? I assume not because a lot of these car manufacturers are voting for this, I’m assuming that there might be an abundance of it out there.”

CPM Group: “No there is no shortage of manganese in in any sense. To start with we don't need any new discoveries, we have enough reserves and resources to last for 325 years at current rates of production. So, that's the first. Secondly, it’s much more evenly spread around the world. It's produced in about 10 countries (or many more than 10 countries but I am just talking about the main deposits which are being used), and these countries are reasonably stable like South Africa, Brazil, Australia which is one of the major producers. There is also production in China. So, there is no risk to the security of supply of manganese. So, from that point of view it is not in short supply but obviously the cathode maker doesn't require manganese ore, they want something else, and this is manganese sulfate. That's a very specialized product. To those of you who are not following a manganese market 90% of the ore is converted into ferro-alloys and goes into the steel industry. So, those chemical products are a niche 10% and within that 10%, less than 1% goes into batteries. So, from that point of view we have plenty of it but…”

Mining Network: “I was going to say on the sulphite side then is there is there a shortage on there, or on that side of the market?”

CPM Group: “Yes and no. So, there is no shortage of sulfate per se but there is a shortage of capacity for high purity sulfate and that's the critical difference because most of the sulfate produced in the world today is going to agriculture. That's for fertilizers production and also as a supplement for cattle feed and some in other industrial applications and that is quite, (should I use the expression) dirty. It contains a lot of impurities, and the battery makers cannot afford this. They need to have very high purity and they need to avoid the elements which are harmful to the battery performance, particularly those metals which have electric conductivity because they produce micro short circuits within the cathode itself, which degrades the battery life. So, the purity is the key here, when we are talking about the production of manganese sulfate. Its capacity is mainly concentrated, you guessed it, in China. 90% of the global capacity for production of high purity manganese sulfate is located in China. So, we are not quite back to the Congo situation but still it's just one country on which the whole world relies. So, that's why we need more projects elsewhere just to spread the risk to the electric vehicle industry.”

Mining Network: “When you're talking about projects, I assume you're talking about the processing plants of the manganese there, to spread around worldwide. Some of our viewers who have been following manganese will recognize that the price has shot up around 230% over the last 12 months. Would you say that this is due to the restrictive processing capacity that you were talking about before there?”

CPM Group: “Yes and no. So, essentially when we are talking about the price of electronic manganese metal ‘EMM’ and it comes in two flavours. The standard quality 99.7% manganese and the high purity 99.9% manganese. These price peaks were caused by changes in the Chinese manganese industry. There is a lot of consolidation going in that industry. Smaller plants are being closed down, production is being cut, bigger companies are investing in more modern technology and so on. So, this is one thing which caused this spike. The second thing is very good demand from the steel industry and finally yes, batteries have an impact on this as well. However, as I said before the cathode makers needed the sulfate and the sulfate is a chemical product rather than the metal product and it lives in an entirely different world on its own, and these prices were rising too of the sulfate. It's a slightly slower rate they grew by 64% over the last 12 months. So, partially the higher price is the first sign of the deficit in this manganese sulfate market and partially it's caused by the events in the steel industry. Nonetheless, the two prices are related and once the metal price is going up inevitably, with a short time lag the sulfate prices are going up too.”

Mining Network: “Obviously there's no shortage of manganese out there, like you're saying there's about 325 years of reserves out there already. No problems there. Are we starting to see a ramp up from the existing producers with the rise in price, to capitalize on that?”

CPM Group: “A lot of existing producers are trying essentially to make the quick back buy, selling more to the steel industry, so there is a lot happening there. In terms of manganese sulfate there is less activity as yet and this is causing the deficit which we are predicting over the next 10-15 years. If we look at the projects in the pipeline, there are very few of them which are coming on stream in the very near future and the pace of this increase in supply is much slower than the pace of growth of demand from the battery sector. That's why we keep talking about the deficit.”

Mining Network: “In terms of new capacity from the processing side. Where are all these new process being built? You were saying there's a lot in China. I’m hoping that there might be some more popping up around the world?”

CPM Group: “Yes, so not surprisingly China is the place where most of it is being built. In the next say 5-10 years they would have doubled the capacity they have right now, remember they account for 90% of the global supply at the moment. There are other projects in different countries so there are several new sulfate projects in Australia, there is one in Europe, there are two in North America and two small projects in Indonesia. There are different stages of development, some of them have only just recently got their first resource made in resource statements, they are yet to build their mine and then their processing plant. The experiments they make with the production of sulfate on the lab scale so it's still not 100% certain how it will pan out when they build the industrial scale plants. Most importantly it takes time to build the mine it takes time to build a processing plant and most important of all it takes time to get approved by the battery maker. This process can take up to 4-6 years in some cases. If you get approved in 2 years you are very lucky, you cannot be approved until such time when you are able to provide several tons sample and those several tons sample don't come from nowhere. You’d have to build a pilot plant at least and the pilot plants are usually a few hundred kilos per year or per month. So, that's why there are long lead times and even these projects which are in the pipeline right now, they have been in the in the pipeline for a while and still we do not see any new capacity coming on stream before 2025.”

Mining Network: “You were mentioning a supply deficit, I don't suppose you'd be able to put a number on it looking forward in terms of what the what the deficit might look?”

CPM Group: “Well, I can tell you some numbers, for more specific numbers and greater granularity you would have to come and buy our research I’m afraid. The global production of the manganese sulfate is about 170,000 tons right now. I’m talking about high purity, not the agricultural grade and this deficit is for 2030, it will be growing slowly from next year actually. This year we have a smallish deficit, tiny. From next year it would start growing properly and by 2030 we see this deficit being between six and seven times the global production today. So, is it feasible to produce that much more in nine years? Well yes and no. On the one hand to build a processing plant it's only about two years, maybe two and a half years the construction process alone but there is a lot of preparation to construction and many people have to build the mine first and there are oxide ores and there are carbonate ores, and one is better suited than the other and so on and so forth. So, we believe the invisible hand of the market will eventually do its trick and then the supply will come on stream but from where we stand today, this large deficit is looming, and it will definitely be impacting the prices of manganese sulphate.”

Mining Network: “Ok, something I wanted to touch on actually was other battery chemistry. So, we see in the battery space very frequently this substitution game. One of the main perks as you've been talking about manganese is obviously the price in comparison to things like cobalt, it has gone for 47 times lower, which is great. It's also in a variety of jurisdictions so you don't have that risk associated with two. So, one of the things, is it possible for manganese to be sort of dethroned in a way and be replaced by something else in the lithium-ion batteries? I have heard also that Tesla for example is looking at returning to an iron phosphate battery, is that potentially going to reduce the market share of the lithium ion-battery moving forward?”

CPM Group: “Yes and no. So, it's not a secret the LFP batteries, lithium, ion phosphate batteries are making a big comeback. Particularly for the entry-level vehicles for the bottom end of the market. They are cheaper but they don't provide such a long range for the for the electric cars like other batteries. For the first time ever, we had to reduce our forecast for the demand for manganese from the battery sector, precisely because of the resurgence of the LFP batteries. Though, this correction is quite small. This deficit I was talking about will shrink by just 4.7% as a result of the resurgent LFP batteries. The volume of the cars, the vote from those three big makers of the cars for manganese batteries makes sure that the demand for manganese is growing. It's this resurgent LFP is just growing a little bit slower than previously predicted but we are still talking about massive deficit so maybe it's not six times the world's production but five times the world's production, in simple terms. Learning other chemistries, I think LFP is the only one which is really threatening, if this is the correct word the manganese or spoiling the broth, or the fly in the ointment. Other chemistries are not that advanced here if we are talking about something completely different like lithium sulphur or zinc air or other chemistries. They are 10-15 years from commercialization and even if they are coming on stream, there will be relatively small quantities. There is another powerful economic factor to be taken into account which is by now, we are talking about something like 240 gigafactories of batteries, lithium-ion batteries by 2030. Many have been built already, others are under constructions otherwise in the pipeline and constructions will start in the next year or two. All these factories are geared for what I call ‘traditional’ NMC batteries traditional technology, to produce cathodes. These investments would need to give their return on capital, this requires 5-10 years and don't forget about this torturous process of approving a supplier. This cuts both ways if the car maker, the cathode maker once they approve the supplier, they are not going to drop them at the drop of a hat, only because somebody else is five percent cheaper. So, these two criteria the technical criterion of manganese being good for batteries and more and more varieties of batteries are using manganese, even as a just as an addition. Plus, the need for return on capital on those 240 factories which are being built around the world. This kind of guarantees quote unquote that manganese will be in the limelight for the next 10 years at least, if not more. That is why we say that the 2020s will be a decade of manganese.”

Mining Network: “Yeah, not so much forgotten about any more then by the sounds of it?”

CPM Group: “That's right.”