Rapid EV growth stokes competition in China’s manganese sulfate market

Competition to establish market share in the battery-grade manganese sulfate market in China is heating up, with expected growth in the electric vehicle (EV) market driving new participants into the sector so far in 2022

Battery-grade manganese sulfate, also known as high-purity manganese sulfate, is a raw material used in the production of the cathode precursor. This is used to produce lithium-ion batteries such as the nickel-cobalt-manganese (NCM) batteries.

The market size for battery-grade manganese sulfate in China could reach 6.18 billion yuan ($906 million) in 2028 compared with 1.81 billion yuan in 2021 driven by rapid EV growth in the country, according to an online report published by consultancy QYResearch.

Market participants are confident about the growth outlook for the manganese sulfate market in the coming years and see opportunity to build positions in the battery raw material sector, they told Fastmarkets.

Fastmarkets seeks to provide more transparency in the growing sector, launching its manganese sulfate 32% Manganese min, battery grade, exw Mainland China, which is assessed weekly on Thursdays from September 1.

Short-term headwinds

Prices for the material have dropped due to weak demand – downstream battery producers received reduced orders from EV companies in the spring, caused by Covid-related control measures in Shanghai and the nearby region in the Yangtze River delta.

Since Fastmarkets started tracking manganese sulfate 32% Manganese min, battery grade, exw Mainland China in March, the price has dropped by more than 34%. In the most recent trial pricing session, Fastmarkets assessed manganese sulfate at 6,200-6,500 per tonne on August 25, down from 9,000-10,000 yuan per tonne on March 17.

Weak demand throughout spring 2022 affected other cathode precursor materials, such as cobalt sulfate. Fastmarkets assessed cobalt sulfate 20.5% Co basis in China’s domestic market at around 59,000-61,000 yuan per tonne on August 26, down from 102,000-103,000 yuan per tonne at the start of the year.

“It may take one year or two for the market in China to turn around. I expect the market will then become more active with more producers entering the market and traders also finding a position,” a manganese sulfate producer said.

The fight to build market share

Outside of the lingering lockdown-induced weakness of demand in China, market participants also said cheaper deals have emerged. New entrants are trying to attract new long-term strategic business at around 6,000 yuan per tonne while more established market produces have held prices firm closer to 7,000 yuan per tonne in recent weeks.

“The market is overlooked because the material is so cheap compared with other battery raw materials, such as nickel, lithium and cobalt,” a trader told Fastmarkets. “It also means the market still have opportunities for others to participate in.”

The manganese sulfate market does not have a high barrier to entry, which could attract market participants such as traders, sources suggested.

“I don’t worry about prices. The price reached around 10,000 yuan per tonne at the end of last year. Without the disruptions caused by Covid-19 pandemic this year, the price could hold there or even rise higher,” a second producer said.

Traders currently play a small role in this market, with most business still between producers and consumers. But some traders continue to keep a close eye on the manganese sulfate market and said they believe they could find opportunities to trade in this market in the future.

Potential demand-driven bottlenecks

More liquidity could come from potential battery makers increasing the manganese content in EV batteries to reduce costs, sources also pointed out that, stoking some expectations that demand could outpace supply

“While we do not expect any issues with manganese ore supply, we believe the rapid growth in demand for battery-grade manganese sulfate could prompt shortages downstream,” Amy Bennett, principal analyst at Fastmarkets, said.

While prices remain low for market participants looking to establish a position on manganese sulfate, market participants say prices are still too low to incentivize new processing capacity in China.

“A potential shortage of battery-grade manganese sulfate processing capacity will likely be the bottleneck in the manganese supply chain serving the EV battery sector,” Bennett added.

The high costs of battery chemistries such as NMC remain a main concern for many EV and battery manufacturers.

“The EV industry is seeking cheaper batteries. Increasing the use of manganese element in the battery is an option under consideration.” a second trader said, “Manganese represents approximately 11% of the weight of an NMC battery, while producers are considering increasing the portion to around 30%.”

The overall cell cost of a typical NMC811 EV battery pack increased by around 60% to $151/kWh between May 2021 and May 2022 while the overall pack cost rose by 47% to $177/kWh, according to a report from Fastmarkets’ research team.

Manganese sulfate could help offset cost risk for potential performance trade-offs but manganese-rich battery technology is still in its infancy. According to Fastmarkets analyst Muthu Krishna, manganese affects cell lifetime; more data on the performance of these cells is needed to ascertain the material’s true growth potential.

“Today, the manganese cost component of NCM cells is very small compared to that of lithium, nickel and cobalt,” Krishna said. “To reduce overall cell cost and exposure to raw material price volatility, there is now interest in increasing the manganese content. NCM 217, lithium nickel manganese oxide and lithium manganese iron phosphate chemistries are being developed, and if we see them performing well then we could see them becoming more widely employed.”

Fastmarkets seeks to provide more transparency in the growing sector, launching its manganese sulfate 32% Manganese min, battery grade, exw Mainland China assessed weekly on Thursdays from September 1.

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