CATL stirring things up in the West, and it's just getting started !

The Demand Paradox That Western Analysts Miss

While Western battery-grade manganese project stakeholders celebrate expected demand forecasts exceeding 2 million tonnes of High-Purity Manganese Sulphate Monohydrate (HPMSM) by 2030–2032, they systematically ignore a fundamental reality:

Chinese producers can and will capture most of this entire demand growth at market prices that guarantee many Western project failures, using the same playbook that has eliminated Western competition in virtually every other battery material's midstream sector.

CATL's recent $4.6 billion Hong Kong IPO exemplifies this dynamic perfectly. The funding enables an expansion that directly threatens LG-Ford and LG-GM's Lithium Manganese Rich (LMR) battery plans,

while positioning Chinese HPMSM producers to dominate with production costs below $600/mt as of 2025, rendering some Western projects with operating expenses (OPEX) around $1,500–$1,850/mt economically unviable.

Even if current projects secure funding by selling the dream of Western independence from Chinese supply dominance, extreme Western premiums are unsustainable, as EV consumers prioritize affordability and original equipment manufacturers (OEMs) need profitability to remain competitive.

This analysis reveals three critical insights:

1. How CATL's expansion directly undermines LG partnerships with major automakers

2. Why rising demand may paradoxically accelerate Western manganese project failures

3. Which specific analytical blindspots consistently lead investors astray

The fundamental principle remains decisive:

anything Western projects attempt to accomplish,

Chinese producers can achieve at lower costs with superior execution speed,

within China and elsewhere.

Chinese Structural Advantages: The Permanent Competitive Framework

CATL's May 2025 IPO raised $4.6 billion to fund a 100 GWh factory in Hungary and a €4.1 billion LFP plant in Spain with Stellantis.

These facilities position CATL to supply Western automakers directly from European soil while maintaining systematic advantages that Western competitors cannot replicate.

Supply Chain Integration and Cost Leadership

While CATL doesn't directly produce HPMSM, it collaborates closely with midstream Cathode Active Material (CAM) and precursor Cathode Active Material (pCAM) producers who secure HPMSM locally through long-term supply contracts, often at below-market prices.

Chinese R&D advances, such as energy-efficient kilns and continuous high-pressure crystallization reactors, have reduced HPMSM production costs to below $600/mt, with future economies of scale promising further reductions.

For instance, advanced Chinese kilns consume only 80–100 kWh/tonne compared to traditional methods requiring 300 kWh/tonne, a 70% energy saving.

Despite current overcapacity, many Chinese HPMSM producers remain profitable at market prices around $729/mt (May 21, 2025), though margins are slim, allowing sustained operations and continuous cost optimization.

This contrasts sharply with some Western projects facing production costs of $1,500–$1,850/mt due to systematic disadvantages:

1. Resource Quality: China sources premium imported manganese ore with 40%+ Mn content, while most Western projects rely on lower-grade deposits (~7–12% Mn, sometimes even presented as MnO at 15% to mislead investors).

2. Process Efficiency: Some Western projects use energy-intensive electrowinning in high-cost energy regions, compared to China's hydrometallurgical direct ore-to-HPMSM processes.

3. Capital Deployment: All Western projects require significantly higher capital investments, as detailed later.

4. Logistics: Some Western projects face high transportation costs of reagents and other chemicals, due to great distances to seaports.

5. Energy Costs: High electricity costs in some Western regions further inflate OPEX.

Execution Speed and Information Asymmetry

Chinese producers deploy capacity rapidly, often without public announcement, while Western projects announce plans and seek financing over multi-year timelines.

This information asymmetry means Western analysts model supply-demand balances based on announced projects, while Chinese private companies develop substantial capacity with much less visibility.

For example, Chinese firms can establish new facilities in 12–15 months, whereas some Western permitting processes (e.g., 18+ months in the Czech Republic) delay deployment, leaving them perpetually behind.

Capital Efficiency Dominance

Typical China-based manganese projects require ~$1,150/mt of HPMSM capacity, while some Western projects demand $3,500–$15,000/mt—a 3–13x disadvantage that cannot be overcome through operational improvements alone.

Chinese producers also achieve ESG parity with Western projects while maintaining cost advantages through superior scale and process efficiency.

What the West can do, Chinese producers can do better, even in Western regions via joint ventures and friend-shoring, ensuring they maintain their competitive edge globally.

Direct Threats to LG-Ford and LG-GM Partnerships

LG Chem's partnerships with Ford and GM face systematic competitive pressure from CATL's expansion.

Ford plans to integrate LMR technology by 2027 for affordable models like mid-size pickups, targeting 20% higher energy density than traditional lithium-ion batteries, which reduces reliance on costly nickel and cobalt.

GM, collaborating with LG Energy Solution, aims to launch LMR prismatic cells by 2028 for electric trucks and SUVs, seeking 33% higher energy density than LFP batteries, enhancing range and performance for heavy-duty applications.

CATL's M3P Technology Advantage

CATL's M3P technology, a variant of LMFP, directly undermines these plans.

Through partnerships with midstream CAM and pCAM producers who secure HPMSM at below-market rates via long-term contracts, CATL achieves cost advantages, enabling LMFP-family batteries that offer:

• 15–20% energy density increases over LFP

• At only 5–10% cost premiums

This makes them formidable competitors to Korean LMR technology when cost considerations dominate purchasing decisions.

CATL's ability to supply these batteries from European facilities further reduces logistics costs, positioning it as a preferred supplier for Western OEMs.

Regulatory Complexity

Regulatory complexity compounds the pressure. The U.S. Inflation Reduction Act (IRA) requires 60% of critical mineral value (including manganese, though it comprises a small percentage of total battery value) to be sourced from the US or Free Trade Agreement (FTA) partners by 2025, rising to 80% by 2027.

This forces LG-Ford and LG-GM partnerships to either:

1. Source from expensive Western projects, absorbing higher costs that diminish competitiveness against CATL's integrated offerings,

2. Risk losing EV tax credit eligibility.

An executive order could waive these requirements overnight, further favoring Chinese supply chains while some Western projects struggle with fundamental economic disadvantages.

The compound effect is decisive: LG partnerships face impossible choices between violating IRA requirements or accepting cost disadvantages that erode their market position against CATL-supplied competitors.

The Demand Paradox: How Growth Eliminates Western Projects

Overcapacity Dynamics

LMR batteries can contain up to 8 times more manganese than NMC-811 batteries, enhancing energy density and reducing reliance on volatile materials like nickel and cobalt, while LMFP batteries increase LFP energy density by 15–20% and contain up to 5 times more manganese.

Industry forecasters in China show the global L(M)FP battery share replacing up to 50% of LFP batteries by 2030, although 2032 may be more probable, creating a $20+ billion market.

Overall, HPMSM demand is expected to exceed 2 million metric tons by 2030–2032, additionally driven by:

• Dual-chemistry trends (e.g., NMC-LMFP blends)

• Emerging sodium-ion batteries

• all the "'newly commercialised high manganese based chemistries

This demand growth creates conditions that overwhelmingly benefit Chinese producers. China controls about 95% of current HPMSM production, with capacity expansion following strategic overcapacity models ensuring supply availability when demand materializes.

This contrasts sharply with Western risk-mitigation approaches that delay capacity until demand certainty emerges, leaving them perpetually reactive.

Price Suppression Mechanisms

Rising demand triggers elimination mechanisms. Any sustained Western price spikes above $1,500/mt could prompt rapid Chinese capacity expansion abroad, creating oversupply close to Western markets that drives prices below previous levels.

Short-term deficits remain fleeting as Chinese producers scale through joint ventures with Western entities to bypass geopolitical policies, ensuring supply availability and price suppression.

Geopolitical Bypasses

The premium pricing fallacy is exposed by market reality. Some Western projects projecting European premium pricing at $2,500/mt, increasing to $4,000/mt by the mid-2030s, are unsustainable as EV buyers prioritize cost over supply origin.

This mirrors global patterns where companies like Apple remain tied to Chinese supply chains despite geopolitical pressures.

Critically, while one European supplier claims to sell HPMSM at $2,500/mt, another non-Chinese supplier offers it at $1,250/mt in 2025, proving that "European premium pricing" lacks solid justification.

It's a pipe-dream used to justify billion-dollar net present values (NPVs) based on hope, not reality.

Chinese producers can establish localized facilities near consumption centers (e.g., CATL's Hungarian and Spanish plants), eliminating Western logistics advantages while maintaining supply chain cost benefits through optimized global sourcing.

Western Project Elimination Mechanics: Insurmountable Barriers

Some Western battery-grade manganese projects face structural barriers that guarantee systematic elimination, with compounding factors creating inevitable failure conditions.

Capital Expenditure Disparities

Capital expenditure disparities create the foundation for failure:

African Project Example:

• Requires $280 million CAPEX for 80,000 mt annual capacity

• $3,500/mt HPMSM capacity requirement

European Project Example:

• Demonstrates even worse economics at $15,000/mt HPMSM capacity

• Production costs reaching ~$1,850/mt

Both projects assume European premium pricing of $2,500/mt rising to $4,000/mt by the mid-2030s—far exceeding some recent non-Chinese supply at $1,250/mt in 2025.

If realistic pricing of $1,450/mt were applied, these projects' NPV would equal zero, rendering them financially unviable.

Chinese Alternatives

Chinese alternatives achieve dramatic superiority:

Typical China-based HPMSM projects:

• Require ~$80 million for 72,500 mt annual production

• ~$1,150/mt HPMSM capacity

• Achieve production costs below $600/mt through: (a) High-grade ore (40%+ manganese), (b) Efficient low-energy processes, (c) Continuous R&D improvements in production flowsheets, and (d) state-of-the-art energy-saving equipment.

Advanced Chinese producers remain profitable despite current overcapacity, maintaining slim but positive margins that enable sustained operations and further cost reductions through economies of scale.

Strategic Expansion

Strategic expansion accelerates elimination. CATL's Western expansion will likely be followed by Chinese midstream CAM and pCAM producers establishing low-cost facilities near CATL sites or in neutral hubs like Indonesia, where China has successfully scaled nickel processing.

These midstream producers, leveraging established relationships with Chinese HPMSM suppliers and proven ability to secure materials through long-term contracts at below-market rates, can supply processed manganese materials to both CATL and Western battery makers while undercutting local projects and eliminating their potential customer bases.

Lessons from Other Battery Materials Sectors

The manganese sector mirrors patterns seen in lithium, cobalt, and nickel markets, where Chinese dominance has systematically eliminated Western competition:

Historical Examples

Lithium Market: Chinese firms like Ganfeng and Tianqi expanded capacity rapidly in the early 2020s, driving prices down and forcing some Western projects like Nemaska Lithium into financial distress.

Cobalt Markets: Chinese overcapacity in the Democratic Republic of Congo (DRC) suppressed prices, leading to the failure of several Western-backed initiatives.

Recent Example: NorthVolt's 2025 bankruptcy, despite $15 billion in funding, underscores this trend: cost disadvantages and Chinese supply chain dominance eroded its market position, a fate likely awaiting many Western manganese projects.

These historical precedents highlight the futility of some Western projects relying on speculative premiums to justify their economics.

Critical Investor Warnings: Systematic Analytical Failures

Western investors face systematic analytical failures, consistently overestimating Western project viability while underestimating Chinese competitive responses.

Price Projection Skepticism

Some Western projects routinely assume European premium pricing of $2,500–4,000/mt, lacking historical precedent for sustained periods.

Claims of one European seller achieving $2,500/mt do not create a market trend, yet price reporting agencies (PRAs) and self-proclaimed "experts" often amplify such outliers to validate corporate projections, misleading investors....

yet, no accountability will ever exist.

Chinese capacity expansion will eliminate such premiums pretty fast through oversupply strategies prioritizing market control over short-term profits.

Premium pricing assumptions exceeding 50% above realistic market levels have consistently failed across lithium, cobalt, and nickel markets, a pattern repeating in manganese.

Capacity Response Speed Miscalculation

Western models assume gradual capacity responses over multi-year timelines, while Chinese producers deploy capacity at multiples of Western speed using fractions of Western capital costs.

Supply deficits appearing sustainable in Western models disappear rapidly through undisclosed Chinese capacity additions, creating systematic overestimation of market opportunities.

For example:

• Chinese firms can scale operations in under 12 months,

• Some Western projects face delays of many years due to permitting and financing hurdles.

Joint Venture and Contract Structure Blindspots

Western projections ignore how Chinese-Western partnerships bypass regulatory restrictions while maintaining Chinese cost advantages, creating hybrid solutions that combine Chinese economics with Western regulatory compliance.

Some Western projects operate with conditional off-take agreements containing escape clauses, while Chinese overcapacity strategies ensure supply availability regardless of contract terms.

Historical patterns show Western analyses consistently projecting supply deficits to justify premium pricing, followed by Chinese capacity responses that eliminate premiums and cause financial distress for premium-dependent Western projects.

Investor Recommendations

Investors must approach some Western battery-grade manganese projects with extreme caution.

The risk of negative NPV and zero revenue is high, particularly for projects banking on unsustainable premiums.

For LG-Ford and LG-GM: Sourcing strategies must pivot—potentially through JVs with Chinese firms or lobbying for IRA waivers—to mitigate cost disadvantages.

For Western projects: Should prioritize radical cost reductions (e.g., adopting hydrometallurgical processes to cut costs by 30–40%) or divest entirely, as survival without Chinese partnerships is improbable.

Government subsidies or technological breakthroughs (e.g., recycling manganese from tailings) are unlikely to overcome Chinese scale and cost advantages, given historical failures in similar sectors.

Conclusion: Structural Reality Versus Western Projections

CATL's $4.6 billion expansion directly challenges LG-Ford and LG-GM's LMR plans while creating systematic conditions for the culling of some Western battery-grade manganese projects.

Despite HPMSM demand exceeding 2 million metric tons by 2030–2032, Chinese structural advantages enable market control through overcapacity strategies that eliminate premium pricing opportunities.

The Numbers Tell the Story

Chinese advantages:

• Production costs below $600/mt

• Capital requirements of ~$1,150/mt

Western disadvantages:

• Production costs of $1,500–$1,850/mt

• Capital requirements of $3,500–$15,000/mt

Some Western financial modeling relying on unrealistic premiums of $2,500–4,000/mt versus market-aligned pricing of $1,450/mt, creates potential 60–70% revenue shortfalls, leading to negative NPV scenarios.

Final Assessment

Investors must face this reality: without radical innovation or strategic alliances that somehow overcome these structural disadvantages, some Western manganese projects and LG's LMR plans face inevitable elimination in a market systematically controlled by Chinese producers operating with permanent competitive advantages.

SPECIAL MENTION of a post below confirming that

LMFP production is growing quitely , whilst LFP and Sodium make all the headlines.

Parody image of the week:

Cheers for now,

Magnus.

https://www.linkedin.com/in/magnus-bekker/