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How did manganese perform in 2023?

The manganese market remained oversupplied for much of 2023 amid tepid demand and high ore supply.

The metal is inextricably linked to the steel market as more than 97 percent of annual manganese production is used in steelmaking. And as Andrew Zemek of CPM Group pointed out, the steel industry is not in great shape.

“Global crude steel production has been falling for the most part of the last two years,” he told INN in an email. “After the first 10 months of 2023 (seven of which recorded a year-over-year decline in production), steel industry output is almost exactly where it was after the first 10 months of 2022 — there was no growth at all.”

This happened even though China, the largest global steel producer, recorded a 1 percent year-over-year rise in steel production in the first 10 months of 2023, alongside a 2 percent increase in the rest of Asia. This dynamic caused manganese ore prices to decline by 10 to 20 percent from the start of 2022. Meanwhile, international prices for manganese ferroalloy, which is smelted directly from ore, were 20 to 40 percent lower as of early December.

China is the largest consumer of manganese, mainly as feedstock for its steel sector. And although the Asian nation is the fourth largest producer of manganese in the world, it is also the largest importer of the metal. Perhaps unsurprisingly, China is responsible for 90 percent of global manganese refining as well.

Decreased steel production activity means less demand for manganese, which has resulted in all-time high surpluses of manganese ore at China’s ports. “Ore prices have responded to the surplus in the market, and ferroalloy prices currently sit below the cost of production, even with reduced ore input costs,” Project Blue analysts told INN via email.

A mid-2023 report from Fastmarkets states that increased manganese imports weighed heavily on manganese prices in 2023, despite the overhang in ore material supply in China.

“According to China customs data, the country imported a combined 15.38 million tonnes of manganese ore in the first six months of 2023, up by 9.03% from imports in the first half of 2022,” said the firm’s analysts.

At the same time, China’s debt-ridden property market, which is a major source of demand for steel, has been in the doldrums for most of the year. “The key single factor affecting manganese demand is the situation of the Chinese construction sector,” explained CPM Group’s Zemek. “Silicomanganese (SiMn) is the most important manganese ferroalloy, which is mostly used in the production of concrete reinforcing bars (rebars).”

He noted that rebar production in China was 6 percent lower in the first 11 months of 2023 compared to the year-ago period, resulting in 8.1 million metric tons of “lost” rebar production, or 163,000 metric tons of “lost” SiMn demand.

What is the manganese supply and demand forecast for 2024?

Heading into 2024, the forecast for manganese supply and demand is slightly better; however, much of what happens will depend on which way the wind blows for China’s economy and the global steel industry.

The World Steel Association is projecting 1.8 percent growth in global steel demand in 2023, and another 1.9 percent increase in 2024, with a slower recovery expected in the developed economies compared to their emerging counterparts, particularly in Asia. “We expect the situation in China’s property market will stabilise in the latter part of the year and China’s steel demand will record slight positive growth thanks to government measures,” the association states.

China’s National Development and Reform Commission announced consumption stimulus measures midway through 2023, with a focus on auto, property and consumer goods such as appliances and electronic products. All of these moves should be beneficial for ferromanganese demand, but with Chinese consumers facing economic restraints it remains to be seen if demand from these sectors will improve enough to bolster the manganese market.

Given those factors, the Project Blue team has a more positive demand outlook for manganese this coming year: “Our 2024 demand estimate is in line with an expected recovery in the Chinese economy, with China dominating 54 percent of the steel market. The property stimulus, depending on additional government incentives, will affect overall ore demand.”

CPM Group also sees better prospects for manganese in 2024, however slight. Zemek stressed that some of the demand placed on the market by 1.9 percent growth in the steel industry “will be met from existing inventories” — not to mention that “the previously forecast 1.8 percent growth in demand in 2023 is not likely to materialize this year.”

Longer term, the expert told INN some analysts are predicting that steel production may only see a compound annual growth rate of 0.7 percent between now and 2032.

Outside of China, critical manganese supply and demand factors are also taking shape. One important region is India, the world’s sixth largest producer of the metal and one of the world’s largest consumers.

The vast majority of India’s manganese goes to the production of steel. This will be a necessary component of reaching the country’s 2040 Vision, which includes the buildout of massive airport hub infrastructure. The World Steel Association is predicting that steel demand in India will “show healthy growth” of 8.6 percent in 2023, and 7.7 percent in 2024 — that would be down from 9.3 percent in 2022. “India is expected to see an increase in both manganese ore production and imports as the country moves towards implementing its 2040 Vision,” said Project Blue.

On the supply side, the Project Blue team is watching supply chain challenges, including reduced rail capacity and port delays in South Africa — the world’s number one producer of the metal. The firm said state-owned Transnet has reportedly received US$2.5 billion to assist with the operational challenges for both its port and rail facilities.

As for new manganese production, CPM Group said there are about 60 development-stage manganese ferroalloy projects scheduled to start production through now and 2025 — nearly all of which are outside of China. If all of these new projects in the pipeline are brought online, the impact on the global market would be about a 6 percent increase in manganese ferroalloy production capacity. This figure outpaces that of the expected growth in steel production.

“But it is not certain if all of them will go ahead, bearing in mind the current overcapacity and general economic climate, and very modest expectations regarding steel production,” Zemek explained in his comments to INN. “With Chinese dominance in manganese ferroalloy production, these new projects outside China will not change much in the overall picture of geographical distribution of production.”

Project Blue “expect(s) ore prices to remain under pressure moving into 2024 due to the uncertainty facing the Chinese steel and construction market.” The firm sees Chinese domestic demand supporting higher ore and alloy prices in the short term, and a potential global economic recovery in 2024 returning prices to a cost-driven level in the medium term.

“Thereafter, our price forecast is more driven by fundamentals and the need for new capacity to be developed,” the analysts added. “We expect prices in China to rise in the second half of the decade.”

What factors will move the manganese market in 2024?

Outside supply and demand, what trends should manganese market watchers look for in 2024?

“A general conclusion from analyzing the 2023 manganese market is that we won’t see any fireworks in 2024,” said Zemek. However, market events could lead to moderate price growth for some manganese products, particularly electrolytic manganese metal, high-purity manganese sulfate monohydrate and certain manganese ferroalloys.

Of course, the main driver of the ferroalloy market will continue to be China’s economic health and the consequences for its construction and steelmaking sectors. “Whatever is happening in the steel sector globally (and in China in particular) translates into demand for manganese (with some delay),” said Zemek. This means investors should watch for any impacts of China’s economic stimulus measures, as well as any additional steps that may come in 2024.

Aside from that, growth in the battery sector is another area for investor attention, particularly the chemical high-purity manganese products used by electric vehicle (EV) battery manufacturers.

“Several high-manganese rechargeable battery chemistries have been developed in recent years, but many will only enter mass production in Q4 2023 and 2024,” said Zemek. “This should reduce the current surplus of high-purity manganese sulfate and lift the prices from their doldrums.”

The team at Project Blue is also keeping an eye on this segment of the market. The firm expects that while prices for manganese sulfate will remain under pressure in 2024, over the long term they will gain support from rising demand from the EV battery sector, which will require a large-scale buildout of new manganese sulfate production capacity.

“Project Blue foresees sustained growth in demand for manganese in EVs over the medium term, as sales of EVs are projected to increase significantly due to governmental pressure to transition to low-emission fleets,” the team told INN.

While China is expected to remain the major producer of battery-grade manganese sulfate moving into 2024, one of the key catalysts for this submarket that should be on investors’ radar is recent funding for several ex-China projects, which could move them closer to development in the new year.

“We estimate existing producers will be able to supply the market via increases in capacity utilization until about 2027, but that, thereafter, new supply will be required if supply is to meet demand,” said Project Blue. “We expect high-purity manganese sulfate prices to follow a similar trend to ore and metal for the next two years, with costs driving prices.”

CPM Group is also watching government policy and funding initiatives that may prove beneficial for ex-China manganese sulfate projects; for example, the US Inflation Reduction Act and the EU’s Critical Minerals Act.

“However, most of the non-Chinese projects in the pipeline are scheduled to start production by 2026/2027, so we’ll not see much change in 2024/2025,” said Zemek.

He added that the high-purity manganese sulfate subsector represents less than 2 percent of the overall market, and is currently oversupplied to the detriment of prices. This low-price environment will likely pose funding challenges for new battery-grade manganese projects, leading to possible production timeline delays and future supply deficits.