One can see many similarities between the manganese metal market and the rare earth metal market.
For example, both categories (manganese and rare earth metals, or any individual metal that comprises the rare earth metal complex) share significant supply constraints, forcing sourcing managers to devise supply- and commodity risk management strategies. Both manganese and rare earth metals come primarily from China. Both have seen price drops as a result of public policies that limit exports (quotas).
Finally, the solution to wean US business off its nearly sole dependency on China for many metals involves a mix of several elements, as we have previously written, including:
- Enactment of US legislation and coordination among government agencies elevating the status of the 43 minerals listed in a recent ARPN report, requiring the development of complete supply chain risk management strategies for each and every mineral;
- Streamlining the US mining permitting process, currently the longest in the world;
- The establishment of public-private partnerships in which industry works with the DOD and other national security agencies to devise strategies and tactics to secure supply of key materials, and
- Strict enforcement of rules-based trade, among several others.
How much of a critical shortage?
Larry Reaugh, CEO of American Manganese, a junior mining firm that recently filed a preliminary feasibility report for its Artillery Project in Arizona emphatically explained to MetalMiner that no shortage of ore exists; rather, “there is a shortage of grades because you’re shipping a lot of gangue (worthless material) off to a smelter or to a ferroalloy plant, mostly in China. With grades declining, you have to enrich the material which adds to the cost.”
Furthermore, he added, with shutdowns for plants producing less than 5,000 tons and/or not in environmental compliance, dwindling amounts of carbonate available (used in the refining process) along with declining ore grades, costs will only increase for the Chinese. Referencing a study conducted by the CPM Group, Reaugh said “they concluded that the price would average close to $2 per pound and China will become a net importer by 2018.”
And that story looks very similar to the rare earth story where some have acknowledged that China could become a net importer of rare earths as well.
As a 1.5-million-metric-ton-a year industry, manganese has been pegged by some to have a shortage at 500,000 metric tons. 28,000 metric tons could come from Manganese Metal Company, according to Reaugh, while China goes offshore to South Africa importing ore and then grinding and refining the ore.
“Everybody making EMD (Electrolytic Manganese Dioxide) outside of China is importing ores. If electric batteries take off, we’ll see some major EMM (Electrolytic Manganese Metal) and EMD shortages,” Reaugh said.
We asked Reaugh to explain the large price drop in rare earth metals that has taken place throughout this year along with price drops for manganese (MetalMiner IndX now tracks manganese), and Reaugh explained it this way: “Rare earth prices skyrocketed and were unsustainable (hence some of the product substitution). Whenever an industry is shut down, they are given time to adjust. Over-production in the rare earths sector has led to the drop in prices and we also see over-production in the EMM market. But once that is gone, we’ll see prices go back up.”
As for American Manganese, they had hoped for a mid-2014 start, but realistically they believe operations will start during Q1 or Q2 of 2015. Let’s hope for manganese-buying organizations that a supply shortage doesn’t occur before a non-Chinese option comes on-line.