South32's GEMCO Shutdown Sparks Manganese Price Rally: Market Faces Prolonged Supply Constraint

Manganese, a crucial component in steelmaking and battery production, has emerged as an outperforming metal in 2024, driven by soaring demand and significant supply disruptions.

While year-to-date gold is up 18.7%, silver 21.6%, and tin surged a remarkable 28%, manganese rallied almost 33%, making it one of the best critical mineral performers.

This metal (symbol Mn, atomic number 25) is not found freely in nature but occurs in combination with iron and other minerals. It plays an important role in steelmaking, where it strengthens the metal and reduces brittleness.

Additionally, manganese is used in batteries and aluminum alloys, making it a crucial element in various industrial applications.

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The supply side of manganese took a major hit when a cyclone severely damaged crucial infrastructure at South32 SHTLF’s Groote Eylandt Mining Co. (GEMCO) operation in northern Australia. The cyclone, which struck in March, caused extensive damage to port and haulage infrastructure, halting high-grade manganese exports and shutting down the operations until at least January 2025.

GEMCO, a joint venture between South32, which owns 60%, and Anglo American AAUKF, which holds 40%, exported approximately 5 million metric tons of manganese ore in the last year. Per South32's reports, the mine was worth $1.5 billion in the 2023 financial year, with an estimated production of 15% of the global manganese supply.

The suspension of operations at GEMCO has caused a significant supply shock, further exacerbating the tightness in the global manganese market at a time when the demand for metal is soaring.

Still, despite issues, South32 seems more than aware of the importance of this metal, showing an interest in acquiring Anglo American's stake as Anglo looks to divest from non-core businesses.

“At the right price, absolutely. We know them better than anyone else,” said South 32 CEO Graham Kerr.

Existing stockpiles initially mitigated the impact of Cyclone Megan, but as these reserves dwindled, the true extent of the supply problem became evident. Smaller miners benefited from the situation, with pure-play manganese junior miner Jupiter Mines JMXXF doubling its price from A$ 0.18 to $A$ 0.37 between March and May.

Per Bloomberg's report, Benchmark Mineral Intelligence analyst Zach Parsons believes that supply constraints and elevated prices could persist until GEMCO resumes operations.

This disruption has prompted other manganese producers to capitalize on the high prices by selling lower-grade materials, providing short-term relief but insufficient to bridge the supply gap.

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