CITIC Securities released a research report saying that the main manganese ore operation under South32, the world's largest manganese ore manufacturer, is expected to reduce global manganese ore supply by more than 10% in 2024, reduce domestic manganese ore imports by about 300,000 tons per month, and there is a risk of serious shortage of manganese ore supply in 2024.
The Zhitong Finance App learned that CITIC Securities released a research report saying that the suspension of the main manganese ore operation under South32, the world's largest manganese ore manufacturer, is expected to reduce global manganese ore supply by more than 10% in 2024, reduce domestic monthly manganese ore imports by about 300,000 tons, and there is a risk of serious shortage of manganese ore supply in 2024. The application of manganese in battery materials is showing an accelerated trend. The sharp rise in manganese ore prices is expected to drive increased sector attention. It is recommended to focus on domestic companies with manganese ore resources and manganese material production layout.
Incidents:
Australian mining company South32 revealed in its 2024 first quarter report that due to tropical cyclone Megan from March 16 to 17, the company's critical infrastructure on Groot Island was severely damaged, and the company's GEMCO manganese ore operations were interrupted. The company expects terminal operations and manganese ore export business to resume in the first quarter of 2025.
The main views of CITIC Securities are as follows:
South32 is the world's largest producer of manganese ore, and disturbances are expected to affect manganese ore supply by more than 10% in 2024
Australia is a major producer of manganese ore in the world. USGS data shows that Australia accounts for about 16% of the world's manganese reserves and production in 2022. South32 holds 60% of the shares in the Australian manganese industry and 54.6% of the South African manganese industry respectively. In 2023, manganese ore equity production reached 5.5 million tons, ranking first in the world in combined caliber production. Among them, the Australian manganese industry will produce 5.63 million tons of manganese ore in 2023. Considering that the project stopped shipping manganese ore in the second quarter, assuming that supply does not resume later, we expect to reduce the annual supply of manganese ore by more than 4 million tons, affecting global supply by more than 10%. There is a risk of serious shortage of manganese ore supply.
Domestic manganese ore imports are highly dependent. This disturbance will cause a shortage of domestic manganese ore supply
In 2023, China imported 31.35 million tons of manganese ore, an increase of 5% over the previous year. Domestic manganese ore production (equivalent to the same caliber) was less than 3 million tons, and the domestic supply of manganese raw materials depended on imports by more than 90%. Australia is China's main source of manganese ore imports. More than 70% of GEMCO's manganese ore exports as described above go to China. Based on this estimate, domestic manganese ore imports will decrease by about 300,000 tons per month starting in the second quarter. Although South32 proposed in the announcement that alternative transportation plans are being evaluated to mitigate the impact of terminal shutdowns, and countries that supply manganese raw materials such as South Africa, Gabon, and Brazil may also increase the supply by a small amount, the shortage of domestic manganese ore supply may be unavoidable.
Supply disturbances have caused the price of manganese ore to rise rapidly, and the price of manganese-silicon products has also risen sharply
Affected by supply disruptions, domestic manganese ore prices have risen sharply. Since April, the price of Australian manganese ore imported from Tianjin Port has risen from 34 yuan/ton to 54 yuan/ton (April 26 price), an increase of nearly 60%. The rise in manganese ore prices has boosted the production cost of manganese silicon. Since April, domestic manganese silicon prices have risen from 6,175 yuan/ton to 7,436 yuan/ton (April 26 price), an increase of more than 20%. Currently, the prices of products such as electrolytic manganese and electrolytic manganese dioxide have not increased. Considering the expectation that the price of manganese ore will rise sharply, we expect that the prices of these products may also rise in the future.
The application of manganese in battery materials continues to be promoted, and sector activity may increase due to price increases
As the industrialization process of emerging battery materials such as lithium manganese iron phosphate, medium nickel high pressure ternary materials, and lithium-rich manganese-based materials accelerates, the proportion of manganese used in battery materials is expected to continue to increase. We pointed out in our previous report “Discussion on Manganese Production Process and Technology Application” that it is estimated that by 2030, the total amount of manganese used in the rechargeable battery industry will increase to more than 1.4 million tons, 12 times that of 2021. This round of manganese ore price increases are expected to drive market attention to the manganese industry.
Risk Factors:
Overseas mines resumed operations earlier than expected; downstream demand for manganese grew less than expected; risk of changes in battery technology routes; and supply of manganese ore in other overseas regions exceeded expectations.