China Hones Control Over Manganese, a Rising Star in Battery Metals
Wall Street Journal 21st May 2021
China is tightening its grip on the global supply of processed manganese, rattling a range of companies world-wide that depend on the versatile metal—including the planet’s biggest electric-vehicle makers.
China produces more than 90% of the world’s manganese products, ranging from steel- strengthening additives to battery-grade compounds.
Since October, dozens of Chinese manganese processors accounting for most of global capacity have joined a state-backed campaign to establish a “manganese innovation alliance,” setting out in planning documents goals and moves that others in the industry say are akin to a production cartel.
They include centralizing control over supply of key products, coordinating prices, stockpiling and networks for mutual financial assistance.
The squeeze sent prices soaring in metal markets world-wide, snagging steelmakers and sharpening concern among car makers.
China’s metal industries already dominate the global processing of most raw materials for rechargeable batteries, including cobalt and nickel.
Three-quarters of the world’s lithium-ion batteries and half of its electric vehicles are made in China.
High-purity forms of manganese have increasingly become crucial for battery-powered automobiles, touted by Volkswagen AG and Tesla Inc. in recent months as a viable replacement for other, more-expensive battery ingredients.
Beijing’s heightened dominance is spurring the development of battery-grade manganese projects from Botswana to Australia, as it is with other battery metals.
“It’s taken them years and huge amounts of investment, but China is by far the leader in many battery metals,” said Scott Yarham, metals director for researcher S&P Global Platts. “If you want manganese sulfate, you’re knocking on China’s door.
It’s exactly why there is so much interest in projects that would remove pure reliance on China.”
While manganese ore is relatively abundant around the world, it is almost solely refined in China.
The manganese alliance notched a success this year in throttling the supply of key products, mainly steel-strengthening additives, sending their prices soaring more than 50% in three months.
Miners and buyers say the squeeze didn’t target battery-grade sulfates critical for EV cathodes, which account for just 2% of manganese production— though sulfate prices also edged higher, commodity pricing databases show.
“We pursue a multiple-supplier strategy whenever possible to avoid one-sided dependencies,” a Volkswagen spokesman said in an email. Europe’s largest electric-auto maker said it is monitoring capacity and demand to safeguard raw-material supply.
Nissan Motor Co., which makes the bestselling Leaf, is “working to diversify risks,” including increasing its stock of raw materials and establishing supplies from multiple origins, a spokeswoman said in response to queries on China’s manganese dominance.
China’s alliance includes companies that make battery-grade manganese, though the group is so far focused on steel-additive manganese products.
Battery-grade manganese is traded mostly privately, and pricing can be opaque. Miners say a metric ton of the purified metal could cost up to $4,000—barely a 10th of the cost of cobalt, a widely used battery metal.
By replacing cobalt, manganese could help auto makers produce 30% more cars with the same amount of nickel, analysts say.
Rival manganese projects outside China view the cartel-like activities as an opportunity to gain momentum for their own battery-grade developments.
“In one sense, it helps us,” said Justin Brown, managing director of Australia-listed miner Element 25 Ltd., which currently produces steel-strengthening manganese and is aiming to make battery grades next year.
“It shows the world how vulnerable they are potentially to that kind of cartel behavior by China. That means they are looking much more keenly to have alternative supply.”
Nine non-Chinese projects to produce battery-grade sulfate are being planned around the world, including Element 25 and others in Africa and Europe, as investors seek to avert overreliance on China, which plans another 12, Mr. Yarham said.
Still, analysts say such projects outside China might take years to start and heavy cost investments to develop.
Viable bases of manganese ore are often located in remote regions, which require expensive infrastructure to ferry and process extracted ores.
Chinese firms have previously worked together to try to control global commodity prices. Chinese steelmakers tried and failed in 2011 to wrangle iron-ore markets. Authorities in 2010 limited exports of rare-earth minerals, used for high-tech manufacturing, to boost prices.
Chinese companies in March demonstrated their sway over nickel when they announced plans to cheaply supply nickel matte, a battery ingredient, sending global nickel prices plummeting 9% in a single day. China has nurtured its domination of global nickel by finding new ways to process the metal’s ores.
The latest moves in China’s manganese market similarly builds on centralizing coordination among otherwise-fragmented domestic companies. The manganese alliance is led by Ningxia Tianyuan Manganese Industry Group Co., the world’s largest producer of steel-strengthening manganese. In October, Tianyuan and the state-backed China National Manganese Industry Technology Committee set broad goals to “unify” the sector.
“As the champion of this industry, and to fulfill our leadership and influence, we have to better manage our output to support prices,” Tianyuan Chairman Jia Tianjiang said in a speech in December.
Days after Mr. Jia’s speech, members of the group announced output suspensions scheduled for coming months. By early April, domestic prices of electrolytic manganese, the steel-strengthening additive, had risen 56% from early December. Sulfate prices rose by a smaller 13% in the period, data provider Wind showed. Exacerbated by a coincidental unavailability of substitutes, the shortage pushed European manganese prices up some 70%.
Traditional manganese consumers were battered. South Korean steel giant Posco had to raise bid prices by 50% in January compared with November, to secure smaller-than- usual shipment volumes because of the shortage, according to Chinese and global commodity pricing reports. Posco didn’t respond to requests for comment.
The Chinese group has set a longer-term target to “upgrade the industry”—meaning assert greater control over its output and environmental impact—by 2023, meeting documents show. “The alliance responds to the call of the nation, and the industry must bravely revolutionize itself,” it said.
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