Is China’s Flake Graphite Industry Headed for Cons
Graphite prices have undoubtedly declined from their “unprecedented” 2011 highs, but according to The Metals Report, Simon Moores of Industrial Minerals Data believes the “industry has seen the bottom of graphite prices and should expect a rise” to begin by the third quarter of 2013.
However, in China that picture is not so rosy. Moores notes in an article published yesterday that over the last six months, the price of flake graphite in the Asian nation has been “falling considerably” on the back of a lack of demand. As a result, “excess medium flake graphite (+/-100 mesh) in the market” has pushed prices down, “in some cases to sub-$700 levels.”
He believes that this situation is unsustainable and thinks that ultimately either demand must increase or the Chinese graphite industry must undergo consolidation, “market-led or otherwise.”
The main concern regarding the consolidation of China’s flake graphite market, The Metals Report states, is that it will lead to the country flooding the market with graphite like it did in the mid-1990s. However, Moores thinks that is unlikely because China “wants to compete with South Korea, Japan, Europe and the U.S.” and “[c]heap exports are not the way to do that.”
Though Moores emphasized that it isn’t clear yet whether consolidation will occur, he mentioned to The Metals Report that China’s amorphous graphite industry has already been consolidated, stating that 230 small mines in Hunan province have been transformed into a conglomerate that controls 50 to 60 percent of that area’s production.
Price update
Moores told The Metals Report that currently +80 mesh material ranging from 94- to 97-percent carbon — his firm’s most commonly quoted grade — is now selling for $1,400 per metric ton, about a 50-percent drop from the highs seen in 2011 and 2012.
While he did not give a firm prediction for future pricing, as noted above, Moores does believe that prices are on their way up. He also noted that “[f]lake graphite prices have settled higher than expected” and “remain 60% higher than pre-recession levels.”