Recently, the High-Tech Lithium Battery Annual Conference took place in Shenzhen, where contemporary advancements in the battery industry drew significant attentionAmong the noteworthy revelations, Contemporary Amperex Technology Co., Limited (CATL) disclosed innovative developments regarding battery structures, specifically the AB panel designThis cutting-edge configuration aims to address the limitations traditionally associated with individual battery packs by complementing battery materials to foster synergies that alleviate issues of conventional designs.

In the context of CATL's strategic direction, their recent launch of sodium-ion batteries and the acquisition of a controlling stake in Litai Lithium Energy, which specializes in lithium manganese phosphate materials, highlight the company's pivot towards what can be termed as “Lithium +.” This term encapsulates the concept of integrating lithium batteries with other materials, inevitably opening avenues for new niche markets within the energy sector.

The sodium-ion battery initiative, as proposed by CATL, also outlines the establishment of a relevant supply chain throughout 2023. Understanding this trend leads us to anticipate that the rise of the Lithium + industry will give birth to another wave of mid to large-cap companies focused on emerging supply chains.

Sodium-ion batteries and the production of lithium manganese phosphate both heavily rely upon manganese as a base materialIn recent months, several leading publicly listed companies have been making substantial investments in manganese phosphate, hinting at the possibility that there exists considerable investment potential in “manganese” industry players from 2022 to 2023.

The genesis of sodium-ion batteries traces back to the first generation released by CATL on July 29, 2021. The initial hybrid battery packs that blend lithium and sodium made their debut, garnering industry interest

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The anticipated energy density for CATL’s second-generation sodium-ion batteries could exceed 200Wh/kg, a notable improvement.

According to reports from investment securities firms, the second-generation sodium battery uses a high manganese Prussian blue cathode structure, consisting exclusively of manganese and sodium metals, with manganese accounting for 35.3% and sodium 14.7% of the compositionThis implies a substantial demand for manganese in the production of sodium batteries, which corresponds to a potential application scenario in China with an estimated demand of 123GWh for sodium-ion batteries by 2025. The sizable market space for this facet of technology, projected to be around 53.7 billion yuan, is expected to be complemented by favorable applications within energy storage, electric two-wheelers, and entry-level electric vehicles.

In addition to sodium-ion batteries, manganese also plays a pivotal role in the synthesis of lithium manganese phosphateTo elaborate, lithium manganese phosphate is essentially a solid solution of lithium iron phosphate and lithium manganese phosphate, requiring iron and manganese sources for each kilowatt-hour produced—specifically, approximately 0.13 kg of iron and 0.38 kg of manganese.

Given that the production processes for both lithium manganese phosphate and lithium iron phosphate are relatively similar, and considering the stability of the olivine structure that lithium iron phosphate exhibits, the incorporation of manganese enhances density without depleting resources given manganese's relative abundance.

The strategic partnership between CATL and Litai Lithium Energy is particularly intriguing, primarily due to Litai’s existing production line for lithium manganese phosphate, which currently boasts an output of 2000 tons, with plans to increase capacity by 3000 tons per year from September 2021 to March 2022. However, observing Litai’s sales figures from 2020 through the first half of 2021—5.66 tons and 27.99 tons respectively—it becomes evident that true commercialization is still on the horizon.

Analyzing Litai Lithium Energy’s production and sales development plans presents a less than formidable scale of operations

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It is reasonable to speculate that, in addition to the potential for technological advancement, the cost factor played a significant role in CATL’s interest in acquiring a stake in LitaiInsights from industry expert presentations indicate that while the cost for lithium manganese phosphate is marginally higher than that of lithium iron phosphate (approximately 5% more), it boasts a notable 20% increase in energy densityTherefore, it stands to reason that lithium manganese phosphate serves as an upgraded iteration of lithium iron phosphate, aligning perfectly with CATL’s “Lithium +” growth strategy.

At the same time, multiple other leading publicly listed companies in China are also positioning themselves within the lithium manganese phosphate industry, with De Fang Nano engaging in notably aggressive investments in this area.

According to a related announcement from De Fang Nano:

The company plans to build a “new phosphate-based cathode materials production base” in the Qujing Economic and Technological Development Zone with an expected annual output of 100,000 tons.

Furthermore, in November, the company completed a non-public offering that raised 3.2 billion yuan, allocating the majority of proceeds to the construction of an 110,000-ton lithium manganese phosphate production line.

In feasibility studies, the company alluded to the successful small-scale validation of its new phosphate-based cathode materials by key downstream clients, garnering significant positive feedbackThis prompted an accelerated fundraising and expansion strategy to pioneer the market for innovative phosphate-based cathode materials.

Production capacity increases are projected to commence small-scale operations in the second half of 2022, with full-scale production set for 2023.

On November 21, De Fang Nano further communicated on an investor interaction platform, noting that lithium manganese phosphate offers a higher voltage platform compared to lithium iron phosphate, significantly boosting battery energy density while maintaining the safety and cost-efficiency associated with lithium iron phosphate cells

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Consequently, there is considerable potential for large-scale application in the new energy vehicle sector.

This places De Fang Nano at the forefront concerning its understanding and investment in lithium manganese phosphate, positioning it advantageously when compared to competitors.

It brings to mind the core reasons behind CATL's fervent investment in sodium-ion batteries and the increasing interest from several leading public companies in lithium manganese phosphate.

Primarily, the intent appears to revolve around reducing battery costs while enhancing overall performance, including range and safety.

The principal challenge lies in the surging price of lithium carbonate, which has adversely impacted the profit margins of midstream battery manufacturersBy December 23, 2021, battery-grade lithium carbonate soared to approximately 267,000 yuan per ton, after witnessing several fold increases since the year's nascent stages.

Some battery plants controlled by industry giants predict that lithium carbonate prices may escalate to between 350,000 yuan and 400,000 yuan per ton in the first half of the following yearComplicating matters, it’s worth noting that 2023 stands as a pivotal year for new energy vehicles from leading automotive manufacturers, anticipated to consume substantial quantities of lithium batteries.

Therefore, the crux of this situation is tethered to lithium production failing to keep pace with escalating demand, leaving lithium carbonate prices unlikely to revert to significantly lower rates in the near term.

In the face of this persistent increase in lithium carbonate prices and the performance limitations of lithium iron phosphate batteries, introducing novel battery technologies is becoming imperative.

Moreover, earlier iterations of lithium manganese phosphate struggled against technological barriers such as low conductivity and rate performance, albeit these challenges are gradually being addressed through modifications involving carbon coating, nanotechnology, and lithium supplement strategies.

Specifically, De Fang Nano successfully leverages carbon coating and nanostructuring techniques to enhance lithium manganese phosphate performance.

In summary, the commercial viability of both lithium manganese phosphate and sodium-ion batteries will produce considerable elasticity in shipment volumes for manganese-related enterprises.

Furthermore, the commercial exploration of manganese is just beginning to unfold.

Recent reports from the Pacific Research Institute shed light on the entire supply chain, delineating the following pathways:

Manganese Ore — Electrolytic Manganese Dioxide — Lithium Manganese Oxide — Applications in 3C, Electric Two-wheelers, and Electric Vehicles

Manganese Ore — High-Purity Manganese Sulfate — Ternary Precursors — Electric Vehicle Batteries

This understanding signifies the pivotal role that electrolytic manganese dioxide will play in its long-term growth potential, contingent primarily upon the commercialization of sodium-ion and lithium manganese phosphate batteries in the medium to long term

In the shorter term, growth can be gauged by whether lithium manganese oxide gains substantial traction.

LiMn2O4 finds its primary applications in 3C devices and electric two-wheelersAs the market for electric bicycles accelerates and the entry-level electric vehicle segment burgeons, lithium manganese phosphate is poised for expansive market opportunities at this time—making it mutually beneficial for manganese oxide as well.

With over 300 million electric two-wheelers currently in operation in China, the introduction of new national standards signals a transitional period from 2021 to 2024, heralding a peak phase of replacement for such vehicles.

Tianfeng Securities anticipates that over 100 million two-wheel electric vehicles will not comply with these new regulations, thus 2023 is predicted to be a pivot point for user exchangesThe EVTank whitepaper reported that by 2020, the production of lithium-based electric two-wheelers reached approximately 11.36 million, reflecting an impressive year-on-year growth of 84.7%, with market penetration climbing to 23.5%.

Estimates suggest that the rate of lithium adoption in electric two-wheelers will sharply ascend, potentially driving the market penetration rate for lithium-based electric two-wheelers to about 60% by 2025.

Additionally, battery packs utilizing lithium manganese phosphate are currently supplied by Tian Neng Co., which has integrated its batteries into the latest models of the Niubao Electric Motorcycle series.

Additionally, there exists a significant player, Xingheng Power, recognized for their consistent use of lithium manganese oxide in two-wheeler and entry-level electric vehicles

Xingheng Power's configurations of compound lithium manganese phosphate and lithium manganese oxide batteries have achieved a remarkable lifespan of 3000 cycles while retaining 80% of their capacity.

As revealed during the 6th International Summit on Power Battery Applications on December 14-15, the company's lithium battery sales have reached 21 million sets in the lightweight vehicle category (including electric bicycles and low-speed cars), securing a number one market share for three consecutive years.

As of 2020, the total installed capacity of lithium batteries reached 4.95 GWh, correlating to global sales of 5.2 million units with a market share of 32.4%. For 2021, the company scaled its output to 10.2 GWh, operating at full production capacity, while anticipated capacity for 2022 is projected at 20 GWh.

This trajectory demonstrates that pioneering firms are already probing into the commercialization of lithium manganese phosphate and lithium manganese oxide, awaiting a surge of capital flow to catalyze further technological advancement.

Returning to the perspective of publicly listed companies, from an investment standpoint, should the market for lithium manganese phosphate or sodium-ion batteries solidify as the future trend, those engaged in manganese-related enterprises at the upstream and midstream segments are likely to reap the most benefits.

Companies such as Xiangtan Electrochemical (002125.SZ), Hongxing Development (600367.SH), Sanxia Hydropower (600116.SH), and Southern Manganese (1091.HK) fall into this category.

Xiangtan Electrochemical, in particular, warrants close observation as it currently possesses the largest manganese resources and ammonium sulfate production capacity, with over 3 million tons of manganese ore that can be mined for a duration of five years.

Manganese ore serves as a feedstock for the production of electrolytic manganese dioxide, aligning the company as the leading provider of electrolytic manganese dioxide in the industry, boasting an output of 120,000 tons in 2020.

Moreover, the company is expediting its diversification into manganese-based materials used in new energy batteries, such as manganese oxide and manganese monoxide.

Another prominent player, Hongxing Development, is positioned as a leading producer of high-purity manganese sulfate.

High-purity manganese sulfate is a critical raw material for both sodium-ion batteries and lithium manganese phosphate fabrication, forming the understructure for ternary precursors.

In a presentation delivered in early December 2021, the chairman of the leading manufacturer of high-purity manganese sulfate disclosed that combined shipments from their firm and Hongxing Development accounted for over 50% of the market share.

The optimism from the chairman regarding the future trajectory of high-purity manganese sulfate speaks volumes about its revenue potential.

In conclusion, the current momentum in the sector indicates that manganese materials are gaining traction within battery chemistry, paving the way for a potentially lucrative investment landscape, particularly in the form of large-cap manganese-focused publicly traded companies emerging from this development.

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