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4 January 2023

Manganese market overview; steel, batteries, and abundance

Manganese is the 4th most used metal by gross weight after iron, copper, and aluminum, and is primarily used to increase the strength of industrial steel, the production of stainless steel, and in lithium-ion batteries. South Africa is both the largest producer of the metal and the holder of the largest economic reserves, mostly located within the Kalahari Desert. The country produced 7.4 million tons in 2021 and is thought to have 640 million tons  of manganese in reserve, Gabon and Australia come 2nd and 3rd in annual production with 3.6 million tons and 3.3 million tons in 2021. Manganese ore (38%) from South Africa costs just $5 per ton.

The main market for manganese is in steelmaking, where manganese is added in small quantities to increase the strength of steel through its sulfur-fixing, deoxidizing and alloying properties. This heavily links manganese demand to the construction sector, which explains the main importers of the material, China and India, which accounted for roughly 75% of the world’s manganese imports in 2020, totaling about $4.5 billion of manganese ore according to the OEC.

The main benefit to manganese is that it is incredibly abundant, while countries like South Africa and Gabon produce a majority of the metal, reserves of manganese are widespread since it is often found within iron deposits such as hematite. Most economic reserves are harvested from pyrolusite which can occur alongside a number of other ores including hematite and other manganese bearing ores such as manganite and hollandite. This is the main source of manganese used in steelmaking as it is used to make spiegeleisen, which is a ferromanganese alloy also known as specular pig iron or bisalloy.

It is also used in small quantities – up to 1.5% – to alloy with aluminum as it increases the material’s resistance to galvanic corrosion. This alloy is then used for some beverage cans.

In 2020, China imported over $4 billion of manganese ore, a majority of which destined for steelmaking, while China’s construction industry took a hit last year with the difficulties suffered by Evergrande, China’s second largest real estate developer, real estate markets tend to be cyclical and so we expect a recovery in the near future as the Chinese government is increasing financial support for industrial investment. We explore this more in our report on the global cement market that you can find here.

However, some of this will have gone towards EV battery production. Manganese continues to be a necessary component of lithium-ion battery cells, historically this was almost entirely in nickel-manganese-cobalt (NMC) batteries, but more recently some companies like China’s CATL are looking to add manganese to lithium iron phosphate (LFP) batteries.

Adding manganese to LFP batteries improves battery specifications on a few key metrics. Firstly is that adding manganese increases the battery’s voltage plateau up to 4.1V from LFP’s 3.4V. This can significantly increase the battery’s energy density which would otherwise be LFP’s main drawback, adding manganese to the cathode could theoretically result in a 15% to 20% increase in energy density, reducing the weight needed to achieve higher effective driving ranges. This is only likely to increase the cost of the battery by around 5% to 10% since the metal is broadly inexpensive.

LMFP also improves upon LFP’s poor performance in lower temperature ranges, improving the battery’s retention rate from 60% to 70% up to 75% at -20°C. which serves to further increase driving ranges in colder temperatures. LMFP batteries are in a relatively infantile stage of research and production relative to its rivals, as such commercial output is almost negligible in comparison. CATL, the largest battery manufacturer in the world, passed the pilot stage of its LMFP battery design in the first half of 2022. It has since sent these to EV manufacturers for testing.

We can expect to see LMFP production increase over the course of this decade as EV demand ramps up and research into the chemistry matures into commercialization. This will feed into demand for refined manganese as a feedstock. This increased demand could lead to shortages of the metal and increased prices if LMFP batteries come to dominate the market, but considering the abundance of the ore, the relative simplicity of refinement, and the presence of large players within the industry with significant capacity, sustained increases in price are unlikely. This will be particularly true if construction in China slows down as demographic problems begin to bite, since this would free up manganese capacity, but this is more likely further into the century.