Graphite Demand is Growing, But Low Prices Mean Tough Times for Miners

LONDON, July 11, 2013 /PRNewswire/ --

Demand for flake and synthetic graphite continues to grow, led by refractories and electrodes.  Higher growth levels are expected in the battery sector, where flake and synthetic are both used and expected to come into increasing competition.  There will be a continued shift away from amorphous graphite as emerging applications typically require large flake and/or high-purity grades.

Lower prices means limited investment for new mines

Average prices of flake graphite have almost halved from the sustained peak seen between mid-2011 and early 2012.  Prices fell continuously as a result of reduced demand and slower economic growth in China.  Although some recovery was seen in May 2013, if lower prices continue, companies developing new graphite projects will face competition for a shrinking pool of investment opportunities.  Understanding the market, finding the right end-users and arranging purchase agreements will be the key to their survival.

New potential for flake and vein supply

On a more positive note, new opportunities are arising within the natural graphite industry as companies explore vast flake resources in Mozambique and potential high-quality vein graphite in Ontario, Canada.  Roskill has identified more than 70 flake graphite projects under development outside China, which have the potential to add 200,000tpy to global capacity by 2016.  Around a quarter of all new capacity could be in Canada, where more than 40 flake graphite projects are being investigated, many at an early exploration stage. Other potential new sources are in Australia, Brazil, Sweden and Madagascar.

Amorphous consolidation in China

China has consolidated graphite mining in Hunan province, the most important area for amorphous production worldwide.  South Graphite was set up in 2010 to take control of 200-250 small, privately-owned mines and bring them under state control.  Production levels are still recovering from temporary closures during the buy-out process.  China is the world's largest producer of natural graphite, both amorphous and flake, representing 70% of total global supply, according to Roskill estimates.

Could flake graphite be next?

World natural graphite production is split 55% flake and 45% amorphous, but the proportion of flake is expected in increase by 2016.  Growth in flake demand will be driven by refractories.  More rapid growth of 5-10%py from the battery market is possible, but from a much lower base in volume terms.  With this in mind, it is possible that China will seek more control in this changing industry and consolidate its flake industry in a similar way to that of amorphous in recent years.

Are lithium-ion batteries the key to future growth?

An important area of demand growth for graphite to 2016 is expected to be that of lithium-ion battery anodes.  Lithium-ion batteries are already the battery of choice in portable consumer electronics.  They are also used to power fully-electric vehicles (EVs), but global uptake has been lower than anticipated in recent years.  In hybrid-electric vehicles (HEVs), lithium-ion batteries are starting to make inroads, replacing nickel-metal hydride (NiMH) batteries as they offer higher energy density per unit weight.  Sales of HEVs based on lithium-ion batteries could increase by up to 0.95M vehicles between 2011 and 2016, eventually overtaking NiMH battery sales.  This substitution would potentially mean significant new demand for both synthetic and flake graphite.

ROW moves away from Chinese supply

China will continue to lead the way for international trade and pricing in graphite, as it has done for many years.  In the long term, Chinese export prices are expected to rise because of the increasing cost of domestic production (as labour, environmental and overhead costs rise) and because of increasing Chinese control through consolidation.  Meanwhile, the quantity of graphite available for export will decrease as China ramps-up production and export of value added products.  These factors will gradually push consumers in the rest of the world to look for alternative sources of raw material elsewhere.

Synthetic graphite production rising

Synthetic graphite production is increasing for use in specialist applications.  The largest tonnages come from the graphite electrode manufacturers, with eight major producers worldwide. The market for graphite electrodes in electric arc furnace steelmaking is growing worldwide and this is the main driver for synthetic graphite consumption. Other markets for synthetic carbon including recarburisers and shapes are also forecast to grow through to 2016.

Note to editors

The report contains 413 pages, 194 tables and 120 figures.  It provides a detailed review of the industry, with subsections on the activities of the leading producing companies.  It also analyses consumption, trade and prices.

For further information on this report, please contact Alison Saxby (asaxby@roskill.co.uk).  To be added to our press distribution list, please contact Pedro Palma (pedro@roskill.co.uk).

Roskill is a London-based and privately-owned company, with more than 40 years of experience of publishing reports on industrial minerals, steel alloys, and minor & light metals, including 40 different market reports and newsletters.  Roskill also offers specialised consultancy services.

Natural & Synthetic Graphite: Global Industry Markets and Outlook, 8th Edition, 2012 is available at £3500 / US$5800 / €4600 from Roskill Information Services Ltd, 54 Russell Road, London SW19 1QL ENGLAND. Tel: +44-20-8417-0087, Fax +44-20-8417-1308, Email: info@roskill.co.uk, Web: http://www.roskill.com/natural-graphite, Full table of content: http://www.roskill.com/downloads/Graphite_Table_of_Contents.pdf