China’s cost advantages, improving demand overshadow Western incentives for manganese sulfate production: Firebird CEO

Producing battery-grade manganese sulfate in China is “logical” even for non-Chinese companies, due to the country’s strong demand and cost competitiveness, according to the chief executive officer of emerging Australia-headquartered producer Firebird Metals

Firebird has manganese ore resources in Western Australia, which it intends to process into battery-grade manganese sulfate via facilities in China.

“We quickly realized that the most logical and the most promising way to develop a sulfate plant would be by doing so in China,” Firebird CEO Peter Allen said in an interview with Fastmarkets on Thursday March 14.

On Wednesday, Firebird announced an agreement with engineering firm China National Chemistry Southern Construction and Investment Co to collaborate on the development and building of a high-purity manganese sulfate plant in Hunan province, China.

Allen explained that the company considered producing sulfate in Australia, but that it did not find this prospect to be financially viable.

The company also sees a potential for demand to grow in the Chinese market due to the increasing incorporation of manganese sulfate into lithium iron phosphate (LFP) anodes, which are prevalent in Chinese electric vehicles (EVs).

The relatively low energy density of LFP anodes can be boosted with the addition of manganese sulfate.

“We see a big wave of LFP that’s going to be converted to lithium manganese iron phosphate (LMFP) in China, and we see that driving manganese sulfate demand,” Allen said.

“LMFP battery electric vehicles (BEVs) are expected to be commercially rolled out in China in the near term,” Fastmarkets analyst Robert Searle said in March.

“The chemistry is forecast to see strong growth at a compound annual growth rate of 58% out to 2034, with the technology replacing units employing LFP and NCM-622 chemistries,” Searle added.

NCM-622 is a lithium-ion battery chemistry prevalent in the West, which uses nickel, manganese and cobalt.

Firebird also expects to be able to take advantage of a quicker time to market.

China “is more favorable from a regulatory perspective, and by choosing to build the plant in an established chemical park, you know a lot of the environmental permits have already been secured,” Allen added.

While there is still some permitting that needs to happen, “it’s not the same level as building a chemical plant in Australia,” he said.

“We could theoretically start construction at the end of the third quarter of this year and begin production at the end of next year,” he added.

Cost competitiveness

Fastmarkets’ price assessment for manganese sulfate 32% Mn min, battery grade, exw mainland China was 4,500-4,900 yuan ($625-681) per tonne on Thursday, stable since February 22.

But this is less than half the price observed when the assessment was first launched two years ago, which was 9,000-10,000 yuan per tonne on March 17, 2022.

This price environment makes cost-competitive production particularly important, and China offers cheaper initial investment and operational costs, as well as a faster time to market, Allen said.

Experts agree that material produced outside China will require a price premium.

Western incentives fall short

The supply of manganese sulfate been cited by market participants as a potential bottleneck for the transition to EVs, with the overwhelming majority of the world’s battery-grade manganese sulfate production in China.

Western countries have introduced incentives to promote the production of manganese sulfate outside of China as part of their drive to secure a supply chain of battery raw materials, and several companies are aiming to capitalize on this.

But Allen believes these incentives would not be sufficient to make production outside of China worthwhile for Firebird, though this would exclude its manganese sulfate from the US market due to the Inflation Reduction Act (IRA) – which offers incentives for producers whose supply chains exclusively use material from “friendly countries.”

“Obviously, the IRA has very strict guidelines and governance, and we’re never going to supply the US from a plant in China. But we see that there’s a very big market in China,” he said.

“And we believe we’ll still be able to supply other parts of Asia and potentially Europe,” he added.

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