Steelmakers, batteries drive new era in manganese

Steelmakers, batteries drive new era in manganese

Tue, 04/09/2018 - 12:36
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Neil Marston

PROSPECTS Neil Marston says there’s a lot to be excited about in the small-cap manganese sector. Photo: Perth Media/Jess Wyld Photography

Interest is rising in Australian manganese, as China’s steelmakers continue to produce at the highest levels on record and battery manufacturers seek supplies of the metal, which is also a key ingredient in lithium-ion batteries.

As the biggest steelmaking country in the world, China is also the largest importer of manganese ore, consuming around 80 per cent of worldwide production.

Chinese customs data showed manganese imports in China were up 15 per cent in the first half of 2018, compared with the same period last year, as the nation’s steel manufacturing sector enjoys a sustained boom, in terms of both output and price.

The booming Chinese steel industry in 2018 has come as a surprise to some market watchers, who expected reduced output as Beijing mandates the closure of its highest-polluting plants and shifts production to newer, more efficient mills.

While it is still to early to tell what sort of impact the US-China trade war will have on the sector, with steel a tariff target on both sides, the strength of the market has been a boon for Australian Securities Exchange-listed manganese players.

Unlike the increasingly crowded lithium market, there are just a handful of listed players with exposure to manganese.

Currently, manganese production is dominated by South African operators, which produce about 36 per cent of the world’s supply.

The next biggest producing country is Australia, which accounts for about 15 per cent of production.

Of Australian miners, the biggest producer is South32, which operates the Groote Eylandt manganese mine in the Northern Territory in a joint venture with Anglo American.

OM Holdings is also producing manganese ore in the NT, at its Bootu Creek mine, while Jupiter Mines is mining manganese in South Africa.

On the exploration side, there is a brace of manganese hopefuls on the ASX boards, including Bryah Resources, Pure Minerals, Element 25, Pacifico Minerals and Spitfire Minerals.

Bryah Resources managing director Neil Marston told Australia China Business Review infrastructure constraints in South Africa would likely curtail any ambitions of increasing supply, opening the door for new market entrants from Australia.

Mr Marston said outside of the steel sector, significant changes in the dynamics of the manganese market were providing a boost of confidence for junior players.

“The thing that’s most exciting about manganese demand is that there is a lot of research going around substituting the lithium, nickel and cobalt in lithium-ion batteries with manganese,” Mr Marston said.

“It can be just as efficient or be more efficient than those other elements.

“If that occurs and the uptake of electric vehicles is greater than projected, or even just reaches the levels which are projected, its going to contribute significantly to the high-end part of the manganese supply chain, so we’re looking at strong prices going forward.”

Bryah, which listed on the ASX in October last year, is fast-tracking exploration and development of its manganese operations in Western Australia’s Bryah Basin to capitalise on the rising demand.

The company’s holdings include the historic Horseshoe South mine, which was shut down in 2011 by its previous operator, Mineral Resources, after it produced more than 1 million tonnes of manganese ore since the 1940s.

Mr Marston said Bryah, and other potential Australian producers, had been bombarded with inquiries from steelmakers and battery manufacturers at the International Manganese Institute’s annual conference, held in Malaysia in June.

“In the battery space, we have had inquiries from Chinese manufacturers of manganese sulphate, who are looking to increase production, mainly due to an increased demand for manganese in batteries,” he said.

“Their supply at the moment is coming out of low-grade mines in China, which won’t cut the mustard for their next round of expansion.

“The direct response we had to us just being at that conference was quite impressive.”

Mr Marston was also bullish regarding the future demand from the traditional user of manganese, China’s steel sector.

He said China’s trillion dollar infrastructure initiative, Belt and Road, would play a huge role in increasing demand for manganese.

“For every tonne of steel that is made, there are 10 to 20 kilos used in the production process,” Mr Marston said.

“It’s an essential element, you can’t make steel without manganese.

“Part of the Belt and Road strategy is this huge network of railways being developed.

“About 32 per cent of all steel production in China this year is going to go to railways in China, not taking into account railways that the Chinese manufacturers are building outside of China.

“I think everyone is probably under-calling future steel demand. If this Belt and Road strategy is to run its full course, it will be just phenomenal.

“We’re just at the start of the process and there are trillions of dollars’ worth of investment to follow.

“Every railway you build uses millions of tonnes of steel, and I’m sure the Chinese won’t be buying steel from Australia to build their railways.”