High Flake Graphite Prices Spur New Development Outside of China
During the fourth quarter of 2018 and early 2019, at least three projects completed feasibility studies and another updated its existing feasibility study.
Despite some downward re-adjustment toward the end of 2018, graphite prices remain high, according to Roskill. Prices increased through late 2017 and again in early 2018 as rising demand for flake graphite from the lithium-ion battery industry coincided with Chinese environmental inspections and temporary processing plant closures.
Higher prices through 2018 have encouraged further development of flake graphite projects outside of China. During the fourth quarter of 2018 and early 2019, at least three projects completed feasibility studies and another updated its existing feasibility study. Several others have completed pre-feasibility studies, scoping studies, or resource updates. Meanwhile, Syrah Resources is one step closer to downstream production outside of China, having installed 5 ktpy of milling equipment at its Louisiana battery anode material (BAM) plant and produced its first unpurified product in December 2018.
Demand growth is robust for spherical graphite, the intermediate product processed from flake graphite for use in lithium-ion battery anodes. Commercial-scale production has so far been limited to China, however, because of high production costs and the use of strong acids and other reagents. A number of companies outside China are trying to develop a non-Chinese spherical graphite supply chain, perhaps using more environmentally sound methods, but they have yet to prove competitive with China at a commercial scale.
China continues to dominate graphite production and demand. Almost all stages of the lithium-ion battery manufacturing chain are focused on China, and China is by far the largest and most rapidly growing market for lithium-ion batteries.
Both synthetic and natural graphite compete for use in lithium-ion battery anodes, along with an increasing amount of needle coke and other existing carbon materials. Demand for raw material graphite in battery applications is forecast to grow by 17-23% per year over the decade between 2017 and 2027.
China has begun to increase its imports of flake graphite, receiving an estimated 60.3 kt in 2018 compared to just 5.5 kt in 2017. Increases have come mainly from Africa, where the Chinese government is encouraging trade by means of zero tariffs on imported goods. China began to import large amounts of graphite for the first time in early 2018, accepting material from Syrah Resources’ Balama operation in Mozambique, which came online in late 2017. Mozambique accounted for around 93% of all Chinese imports in 2018.
Africa provides a potential source of low-cost production as China’s own mining costs continue to rise with increasing labor, energy and environmental costs. China has a recent history of investing in Africa in other mining sectors and is investing heavily in infrastructure projects across the continent.
High synthetic graphite prices in 2018 were the result of a perfect storm of conditions in China. Firstly, environmental plant closures in the raw material coal needle coke industry hampered the production of graphite electrodes. At the same time, consumption of graphite electrodes in electric arc furnaces (EAFs) began to rise as the Chinese government took steps to halt production of poor-quality induction furnace steel. Graphite electrode prices began to increase dramatically from the middle of 2017 before falling and rising again quickly in late 2017/early 2018. Prices subsequently fell through much of 2018, but by February 2019 were still more than 200% higher than they were in early 2017.
Prices could strengthen again going forward as demand for electrodes ramps up from the Chinese EAF industry. China began switching much of its steel production to EAF from 2017 and is expected to increase the rate of this change as more end-of-life steel becomes available. Currently, less than 10% of Chinese crude steel is produced in EAFs, but this could grow to 25% or more over the next decade.
Meanwhile, the availability of needle coke continues to hamper the supply-side of the electrode industry. New needle coke production is being brought online, but rampup is a slow process. At the same time, demand for needle coke is growing in lithium-ion battery anodes, diverting some of the material otherwise used in electrodes. As of 2020, stricter marine pollution (MARPOL) regulations could also impact the supply of petroleum-based needle coke with increasing demand for low-sulphur fuels traditionally used in petroleum-based needle coke production.
For more information, visit www.roskill.com.