High Purity Manganese Sulphate Monohydrate (“HPMSM”) Market
Manganese Market Overview
Until recently, approximately 90% of manganese ore has been used in the traditional steelmaking process, with the remaining 10% used to produce electrolytic manganese metal (“EMM”), electrolytic manganese dioxide (“EMD”) and manganese sulphate (MnSO4). The manganese sulphate market is further broken down into “fertilizer grade”, with specifications based on toxicity relevant to its agricultural applications, and “battery grade”, with specifications based on strict limitations of battery active impurities. HPMSM is the highest purity “battery grade” manganese sulphate and is the manganese chemical used in a lithium-ion battery, in particular the NMC (nickel-manganese-cobalt) cathode, which is becoming the dominant cathode in the electric vehicle (“EV”) market.
Production Methods
HPMSM can be produced by two main methods, being (i) the sulphuric acid dissolution of EMM; or (ii) a chemical based process that uses manganese ore as a feedstock. The cost of producing HPMSM from the dissolution of EMM is more expensive and more carbon-intensive than chemical-based processes that use ore directly as a feedstock; however, few ore bodies are suitable to produce HPMSM directly without first electrolising the metal (i.e. without first creating EMM). In general, orebodies amenable to chemically produced HPMSM directly are the less common carbonate hosted manganese orebodies. Thus, the most efficient and least carbon intensive method of producing HPMSM is directly from a suitable low-impurity carbonate hosted manganese orebody.
Demand landscape
Demand for HPMSM is driven by demand for lithium-ion batteries, in particular the NMC cathode becoming dominant in the EV market. Total annual demand for lithium-ion batteries (in terms of power capacity) is expected to increase exponentially this decade, from 279 GWh in 2020 to 2,139 GWh in 2030, representing a 22.6% annual growth rate (source: CRU Group). This growth is driven by demand for EVs, with global unit production of EVs expected to increase from approximately 6 million units in 2020 to 41 million units in 2030 (source: CRU Group). This EV revolution is driven by (i) environmentally focused consumer considerations; (ii) incentives (subsidies) offered by governments intent on meeting emission reduction targets; and (iii) EV performance improvements, moving the typical EV range per charge closer to the miles per fill-up of a traditional internal combustion engine vehicle. As price and performance parity approach equilibrium by about the middle of this decade, EVs are expected to represent 30% of vehicle sales by 2030. Indeed, many jurisdictions intend to ban the sale of internal combustion engine vehicles in the intermediate term, with the UK’s ban, for instance, expected to take effect in 2030.
Battery Cathode Technology
EV manufactures are constantly striving to increase energy density (i.e. energy held for a given weight of battery), since this improves driving range and lowers manufacturing cost. This goal has led to two clear winners in cell chemistry for EV usage: (i) NMC (nickel-manganese-cobalt) cathodes; and (ii) NCA (nickel-cobalt-alumina) cathodes. NMC cathodes use HPMSM as the manganese component, whereas NCA cathodes contain no manganese. Within both, there is a growing trend of attempting to reduce the cobalt content, using more nickel and manganese as a substitute, due to cobalt’s scarce, expensive and challenging supply chain, sourced largely from the Democratic Republic of Congo (DRC).
As a result, almost all new EV offerings by the larger vehicle manufacturers have adopted NMC as the chosen cathode chemistry, due to its cost effectiveness, performance and supply chain considerations. This trend toward NMC cathode usage in EVs is not expected to change this decade, however the ratio of nickel, manganese and cobalt components is still shifting, with nickel typically the largest component by weight and manganese (HPMSM) growing at the expense of cobalt. By 2030, NMC cathodes are expected to represent 60% of the cathodes used in the EV industry, with the dominant cathode being NMC 811 (8 parts nickel; 1 part HPMSM; 1 part cobalt) (source: CRU Group).
Demand Forecast
Due to the demand drivers outlined above, HPMSM demand is forecast to grow from 136kt in 2020 to 608 kt by 2030, representing an approximately 16.2% CAGR, with approximately 90% of the end-usage being in EVs (source: CRU Group).
Supply Landscape
Currently, there are only 12 independent plants in the world producing an estimated 163 kt of HPMSM. Ten of these plants are based in China (143 kt), one is Japan (10 kt) and one is in Belgium (10kt) (source: CRU Group). Thus, approximately 90% of current production of HPMSM is based in China.
By 2025, based on committed and probable new projects and expansions, global production of HPMSM is expected to nearly double to 324 kt, mainly due to expansions of China-based producers and, potentially, a new European project based in Czechoslovakia (source: CRU Group).
Notably there is currently no western hemisphere producer, and in particular no North American producer, of HPMSM.
Market Balance
Based on current HPMSM production levels and committed and probable new projects, a current modest supply surplus is expected to yield to a supply deficit by 2024, as global production of HPMSM is not expected to keep pace with global EV driven lithium-ion battery demand for HPMSM as set out above.
Regional and Environmental Dynamics
In addition to the expected global supply deficit of HPMSM developing this decade, production is expected to continue to be dominated by China, with no current producer located in North America. End use customers, particularly EV manufacturers in Europe and North America, are expected to continue to face consumer and government pressure to use HPMSM sourced from regional suppliers with a lower carbon footprint than current China-based suppliers. As manganese has been designated a “critical mineral” in the United States and Canada, this dynamic creates a compelling opportunity for a regional producer of HPMSM, in particular from a carbonate hosted ore body using a low carbon-intensity production method, to directly supply the North American EV industry.