After uncertainty due to COVID-19 in 2020, the manganese space saw a strong rebound in demand in 2021.
Despite not being widely known, manganese is extensively used in metallurgy. In fact, it is the fourth most common metal by tonnage, just after iron, aluminum and copper.
What will happen to manganese this year? To find out, the Investing News Network (INN) reached out to analysts in the space to get their thoughts on what’s ahead for the battery metal in 2021.
Manganese trends 2021: The year in review
Volatility was high in the manganese market in 2020, with many analysts predicting at the end of the year that 2021 would see a recovery in steel demand and oversupply in the market.
Looking back at how the market performed in 2021, Clare Hanna of CRU Group told INN that prices for manganese ferroalloys and manganese metal rose to far higher peaks than expected and stayed elevated for longer because of the strength of demand and supply chain costs and bottlenecks.
“It was only in Q4 that we started to see prices begin to come off the peak, and even then not everywhere,” she said. “The US market with its high dependence on imports and its higher preference for contract over spot purchasing has been insulated from the falls elsewhere so far.”
Manganese metal price rises in 2021 were quite staggering. According to CRU, FOB China prices for manganese metal were 217 percent higher by the end of the year, and were 269 percent higher at their November peak.
“Chinese producers dominate supply of this product, and producers were affected by the power crisis and also some coordinated maintenance outages,” Hanna said. “Together, these drove prices up. European and US consumers then had to pay for the high additional container costs on top of this.”
Manganese is mostly mined in South Africa, Australia, Gabon and Ghana, with global production reaching around 18.5 million tonnes in 2020. About 90 percent of manganese is consumed in ferroalloys, while only around 10 percent is used for specialty products, including electrolytic manganese metal (EMM) and manganese sulfite monohydrate (MSM). High-purity EMM and MSM can be used in lithium-ion batteries.
According to CPM Group, global manganese ore production increased by 7 percent in 2021 (up to November), although China’s output went down 15 percent.
“That's significant, because China is the largest steel producer and the largest consumer of manganese for steel applications, so it's important for them to have their domestic production,” Andrew Zemek, special advisor at CPM, explained to INN. Production went down for all sorts of reasons, including power shortages, winter plant closures and environmental restrictions.
“China’s imports also went down, and that's significant because it very much relies on imports of manganese ore. China accounts for 74 percent of global imports of manganese,” he added.
In 2021, the main surprises that affected the manganese market were the speed and duration of the bounce-back in demand from the steel industry outside China. “(That was in contrast to) the extent of the slowdown in steel production in China in H2, and then the container and freight market crises that drove prices up and built huge delays into the shipping of manganese alloy products,” Hanna said.
As a result, manganese ferroalloy supply struggled to catch up with demand outside China, leading manganese alloy prices to rise right through to November.
“Initially this was because supply chain stocks were low and producers were operating at lower levels; then container shipping delays meant ordered material didn’t arrive when planned,” Hanna said.
By contrast, manganese ore prices were more closely linked to developments in China.
“Compared to iron ore, prices were relatively flat, even with higher freight costs,” Hanna said. “We had identified additional supply coming onstream from Eramet (EPA:ERA), and new mines in South African and potentially Australia ― all of this new capacity started and contributed to keeping supply in balance.”
The speed of the steel industry's recovery also took CPM’s Zemek by surprise, as all indicators pointed to demand staying flat or declining, with global demand growing by 7 percent. “But again, in China, there was a very mixed picture,” he said. “The first half of the year was about a 15 percent year-on-year increase, and the second half was a 16 percent year-on-year decline, so all in all no growth of steel in China.”
Within steel, stainless steel production grew by 17 percent during the first three quarters of the year, higher than the 6 percent seen in carbon steel ― a trend that Zemek has been following for some time. “Manganese ore prices were relatively stable compared to other manganese products, which is a reflection of the positive and stable situation on the mining side,” he said. “But nonetheless, prices went up 20 percent compared to January 2020.”
Even though ore prices didn’t grow as much in 2021 as they did the previous year, products made from manganese ore saw prices surge.
“Silicomanganese, the largest of the ferroalloys, had a price spike in October (last) year, trading at 100 percent higher than in January 2020, (and) increasing 14 percent during 2021,” Zemek said.
Meanwhile, high-carbon ferromanganese remained flat in 2021, but prices were still up 20 percent compared to January 2020. Refined ferromanganese had a price spike in October, coming in 150 percent higher than in January 2020, and ended the year 27 percent higher than it was in January 2021, according to CPM data.
“Production is up significantly and prices are not drastically up, but still going up ― to me this signifies a very healthy market,” Zemek said.
Manganese specialty products have also had an impressive run since January 2021, with EMM soaring 225 percent and high-purity MSM rising 68 percent.
Manganese outlook 2022: What’s ahead for demand, supply and prices
Looking over to how prices could perform in 2022, CRU is forecasting that manganese ferroalloy prices will correct significantly as the markets come back into balance and logistics bottlenecks ease.
“Manganese metal demand outside China will remain strong, but Chinese producers should be less affected by power shortages and emission control policies after Q1, so if they increase output we would expect prices to fall,” Hanna said. “If they continue with major maintenance shutdowns, the picture could be very different.”
CRU is expecting global steel production to grow in 2022, in spite of a forecast reduction in production in China, because India and Southeast Asia, along with new capacity coming onstream in the US and the continuing recovery in Europe, will all require more manganese.
“Construction is a key driver, but once the chip shortage eases, we expect steel consumption in the automotive sector to recover,” Hanna said. “However, we think there are a significant number of cars being completed except for the chips, so steel and therefore manganese requirements, such as manganese metal, may lag.”
With demand being strong and prices remaining high even after a correction, CRU expects good supply this year.
“New manganese alloy capacity is planned in Malaysia and India, and Satka are buying the mothballed Metalloys plant in South Africa with the intention of restarting it,” Hanna said. “Element 25 (ASX:E25,OTC Pink:ELMTF) are planning the next phase of the manganese mine development in Australia that will double capacity at this mine.”
CRU is also expecting manganese mine output in Brazil to recover. Looking ahead, the firm is forecasting ferroalloys markets to be more closely balanced; however, a slight surplus in ore markets is expected.
A major area of interest for investors has been the use of manganese in electric vehicle (EV) batteries. That said, as previously mentioned, it is important to note that not all manganese can be used in EV batteries — only high-purity specialty products can be used, mainly EMM and MSM.
Given the EV demand growth forecast, CPM is expecting a compound annual growth rate of about 43 percent for high-purity manganese products in the next five years.
Speaking specifically about the battery sector in coming years, CPM’s Zemek sees a huge deficit of high-purity manganese for the battery industry.
“When we look at the project pipeline, it's very thin. There are very few projects which are close to production; there are a few more which are early stage exploration,” he said. “The deficit is going to be so big that to fill it by 2030 the global production of high-purity manganese products, which is mostly the sulfate, will need to grow more than 10 times to meet that demand.”
These strong fundamentals will likely push high-purity manganese prices further up.
Manganese outlook 2022: Factors to watch
In terms of factors to watch that could impact the manganese market, Hanna said investors should look out for news of Chinese companies building ferroalloy capacity outside of China to take advantage of green energy.
“(Additionally), there are a number of projects to build manganese metal and manganese sulfate capacity outside of China to support EV supply chains,” Hanna said. “Watch for any of these moving to or beyond pilot plant phases.” She is also keeping an eye on Australia, where a number of mine projects have looked at how fast Element 25 was able to get its Butcherbird mine up and running, and are wondering if they could do the same.
Commenting on the biggest risk in the manganese market, Hanna said a sharper slowdown in China — especially the construction sector, which uses rebar, a heavy consumer of silicomanganese — is a catalyst to watch.
