Riverrock, thoughts on this 1/31/18 Syrah article, thanks! AABC EUROPE 2018: EV boom will spur China’s shift to net importer of graphite – Syrah Resources
By CHARLOTTE RADFORD
Published: Wednesday, 31 January 2018
New market entrant Syrah Resources forecast a macro change in graphite global supply in the coming years, with battery and EV end markets leading China to become a net importer of the mineral.
The graphite market will undergo a shift in structure and pricing that could see China becoming a net importer of natural graphite to meet forecast local demand for electric vehicle (EV) batteries, according to Luke McFadyen of Syrah Resources.
Syrah, which brought online its Balama graphite mine in the fourth quarter of last year, expects China to gradually turn from being the single largest exporter of the mineral to an importer while the battery sector in the country develops.
"China’s industrialization is nearly at its end – they’re just putting the finishing touches to it now – [so] demand growth for graphite is all dependent on electric vehicles," McFadyen, Syrah Resources’ market analysis and economics manager, said at the Advanced Automotive Batteries Conference in Frankfurt, Germany, this week.
Graphite demand from the electric vehicle sector was 60,000 tonnes in 2015. Demand for the battery anode material is forecast to reach 350,000 tonnes by 2020, and 900,000 tonnes by 2025, delegates in Mainz heard.
"The electric vehicle impact on demand for natural flake graphite is significant and imminent," McFadyen said.
China currently accounts for over 60% of natural flake graphite production globally. The country is also the main exporter of the mineral, although domestic demand is increasing rapidly.
In the nine months to the end of September 2017, China imported 2,852 tonnes of flake graphite, up 250% year on year, according to customs data. The country imported around 900 tonnes in July alone - more than it bought in the whole of 2014.
The value of imports has more than doubled, rising 215% to more than $1.2 million this year from below $400,000 in January-September last year.
Various constraints during 2017 wreaked havoc in the local supply chain.
Production in China’s Shandong province was hit by environmental inspections and intermittent shutdowns.
Graphite prices have increased as a result of the supply-demand dynamics. Industrial Minerals last assessed graphite flake, 94-97% C, +80 Mesh, at $1,050-1,210 per tonne fob Qingdao, up 45% from a year ago.
The necessary shift in China’s buying patterns is likely to be a precursor to a shift in pricing structures in the graphite market, triggering a shift away from fixed-price long-term contracts, in favor of pricing linked to spot reference prices.
"Last time this happened was in iron ore and metallurgical coal in the early 2000s. [This shift in trade flows] will fundamentally change the graphite market. It’s like selling oil to Saudi Arabia," McFadyen said.
"[Graphite pricing mechanisms] might not become like gold or oil, but it’s not unrealistic to say we could have a situation like metallurgical coal," he added.
As it stands, the structure of the market sees the majority of graphite committed on long-term agreements, which should protect prices from extreme volatility, delegates heard.
"Theoretically, graphite prices shouldn’t fall," McFayden said. "There’s not the spot liquidity for prices to crash. Every tonne we mine is presold. This year we’ll produce 160,000-180,000 tonnes of graphite, and 100% of that has been presold. In 2019 we’ll produce 250,000-300,000 tonnes and the reason we have that figure is because 100% of it is presold, so prices won’t crash."
Syrah's production at the Balama mine in Mozambique is slated to ramp up 350,000 tpy.
"We’re mopping up the incremental demand so there’s not that excess supply [to cause prices to fall]," he added.
But in response to forecast demand from anode producers and the electric vehicle sector, Syrah is looking at options to further increase Balama’s output profile.
"We’re looking at expansion, because the market needs a lot more graphite in the not too distant future," McFayden said. "We’ve known about the [Balama] deposit for 130 years, it just took something like electric vehicles for it to be induced."