You may have never heard of it, but soon manganese may become one of the most sought after elements in the world. As a result, manganese prices may be headed much higher.
What is Manganese?
Excluding a small circle of technical specialists including metallurgists and chemists, manganese is a little-known element.
Nevertheless, it’s the fourth most used metal in terms of tonnage, being ranked behind iron, aluminum, and copper. Today nearly 29 million tons of the ore if being mined annually.
Manganese is a grayish-white metal. It is the twelfth most abundant element in the earth’s crust, but is only rarely found in concentrations high enough to form a manganese ore deposit. Among some 300 minerals containing manganese, only about a dozen are of mining significance.
Manganese has numerous applications which impact on our daily lives as consumers. Objects made of steel, portable batteries, and aluminum beverage cans all require manganese for production. In each case manganese plays a vital role in improving the properties of the alloys and compounds involved in each specific application.
Manganese is an essential ingredient to iron and steel production. In fact, nearly 95% of the world’s total annual production of manganese is directly allocated to the iron and steel industry to purify iron and to make alloys.
In alloys, manganese increases the durability and corrosion resistance of iron and steel and makes steel more malleable when forged.
So why should you care about all this? Because the demand for this metal is expected to skyrocket. As a result manganese prices are also expected to increase.
Manganese Market Under Pressure
The international manganese trade has long been linked with the demand steel in the industrialized countries such as Europe, North America, Japan and South East Asia.
In the early 80s, a slowdown in steel production combined with a decrease in consumption severely lowered the demand for manganese.
But now heavy demand for iron ore is back, coming mainly from developing economies like China and India. This has created the biggest bull market for manganese ever in recent years.
And, with China’s seemingly insatiable hunger for steel expected to continue, it can be assumed that the demand for manganese to go even higher.
Analysts have predicted that the steel demand will grow by 2.2 trillion pounds this year. That means huge demands for manganese and huge profits for producers.
One producer, BHP Billiton [NYSE: BHP], has already cashed in on the rally. In 2005 share prices increased nearly 40%.
Another firm, French producer Eramet [EPA: EUR], has also cashed in on the bull market. Eramet shares have increased 72% in the past 12 months. (Note: Both of these companies also produce several other alloys but have a significant stake in the manganese industry.)
Current estimates of world manganese reserves including low grade ore, reach several billion tons.
But if only high grade ores (defined as having more than 44% manganese content) are considered then reserves are in the range of 680 million tons of ore, essentially situated in the Western World, with Australia, Brazil, Gabon and South Africa, supplying over 90% of the international market.
Thin Manganese Supplies Worldwide
Ghana and India, both large suppliers of the Western World in the past, are now exporting only limited quantities of low or medium grade ore.
The ore mined in Mexico is mostly for internal usage, but part is exported in the form of manganese nodules.
The former Soviet Union was the largest supplier of manganese ore at the beginning of the century. But is now left with only low grade ore reserves which have to be upgraded for commercial use. Only a limited amount of these reserves is exported, in quantities that are likely to decrease.
Manganese ore deposits are widely distributed in China. But again there is no high grade ore, nor important reserves, and mines are generally situated far from the end-user industries: in consequence China imports high grade ores to blend with native material.
There are large manganese reserves on deep ocean floors in the form of polymetallic nodules. But recovery will be difficult and very expensive.
So here’s where we stand: Demand for manganese will inevitably increase. With thin and low grade supplies worldwide, manganese prices are coiled for further increases.
Manganese producers and firm with large land holding than contain the ore in high grade are now in a good position to increase revenue. It appears that manganese prices are headed higher in the near-term.
Good Investing,
Luke Burgess
Managing Editor, Gold World
Investment Manager, Secret Stock Files
