By Roskill Deputy Manager Suzanne Shaw, Andrew Miller, head of price assessment at Benchmark Mineral Intelligence, and Priscila Barrera, INN
One of the main catalysts in the graphite industry last year was China’s continued shift away from upstream production towards downstream production. The country saw increasing imports, mainly from Africa,...
“China imported more than 53,000 metric tons of natural graphite in the first three quarters of 2019 (mainly from Mozambique and Madagascar), compared to just 12,000 metric tons in the same period of 2018,” she said. “Imports are thought to have declined in Q4 with the reduced production from Syrah Resources (ASX:
SYR,OTC Pink:SYAAF).”
Shaw also identified further rounds of environmental closures to reduce pollution and improve efficiency as another factor impacting the space in 2019.
“Africa is logistically useful for Chinese customers (and) has major graphite
resources, and China has a recent history of investing in the country, which has relative cheap labor and other overheads,” she said. “China itself is on a program of moving away from lower-value production (mining) towards downstream product, but also its
own graphite resources are becoming deeper and more expensive to mine.” Shaw said investors should keep an eye on stronger-than-expected capacity closures in China — both in synthetic and natural graphite — which could impact the market in an exaggerated way. Additionally, there is the potential for a tightening in synthetic graphite supply.
“The synthetic space has seen strong growth in China due to the lifecycle benefits that the country’s producers can obtain compared to spherical graphite. On the natural side, there is still major growth from battery markets, particularly in other parts of Asia where producers have overcome technical challenges using a natural-dominant anode blend,” the analyst added.
Miller: “As with many battery raw materials, graphite finds itself in a transition period where new capacity has been installed, but the real major changes in demand have not yet been felt,” he said. However, he explained, there is still very good demand growth from the battery sector as well as from other value-added markets such as expandable graphite.
Speaking about
anode material for batteries, Miller said the anode supply chain is often overlooked in the lithium-ion battery story, but significant investment will be needed to meet future demand growth.
In fact, anode demand and production capacity are expanding at an unprecedented rate, led by the emergence of megafactories to supply the EV revolution.
“In our perspective, graphite will remain the dominant raw material for anodes in the long term,”
he said. “It will be a blend of natural and synthetic … you are still going to see a huge amount of growth in graphite.”
Looking at the impact of both synthetic and natural graphite, the expert said
the market will grow at a 24 percent compound annual growth rate over the next decade. “Both natural and synthetic markets have been built around the demand from industrial applications, but what we’ve seen is a soft outlook from the industrial sector,” Miller said. “Even though the foundations of this industry will remain strong, we believe the growth in this market will come from the value-added applications for graphite.”
The graphite space, said Miller, cannot be treated the same as a whole. The variation in products and processing channels is key in understanding the market.
“When looking in particular to batteries, you have to look at what type of material can actually supply those anodes — it is not all flake graphite or synthetic graphite,” he added. “In the longer term, what you see is that the graphite market, both natural and synthetic, isn’t set up for the type of demand batteries will be pushing in the next few years.”