Refractory grade graphite: Seeking Chinese supply diversification

Refractory-grade graphite in 2013
Simon Moores, UNITECR 2013, Victoria, Canada
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
www.indmin.com/GraphiteAnalysis

1. The situation
2. Production
3. China
4. Exploration boom
5. Prices
6. The future

1. The situation
• The world has become over-reliant on good quality, low cost flake
graphite from China
• Some major refractory producers are seeking supply
diversification, reduce dependence on China
• No new mines outside China since the 1980s
• New raw material competition on horizon
• Steady supply from China being threatened
• Long term, stable prices have not existed for 5 years

Where is natural flake graphite mined?

Where is natural flake graphite consumed?
2012
Refractories, foundries and
crucibles - 39%
Batteries - 9%
Metallurgy - 28%
Lubricants - 9%
Part & components - 10%
Other - 5%

#1 China
Shandong, China
• Dominates all forms of natural graphite production
• Flake, amorphous and spherical
• 61% of world’s flake graphite in 2012
• 89% of world’s amorphous graphite in 2012
• Main producing regions for flake
• Heilongjiang
• Shandong
• Inner Mongolia
• Total flake output in 2012: 450-480,000 tpa
• No active restrictions on graphite supply
• Graphite listed as a strategic mineral in China,
consolidation under discussion

#1 China
Shandong, China
China’s graphite production rise:
China’s % of global graphite output
1973 - 15%
1983 - 33%
1993 - 50%
2003 - 84%
2013 - 78%

#2 Brazil
• 23% of world’s flake graphite output
• Nacional de Grafite (right) – world’s largest non-
Chinese producer by far
• Supplier of large and medium flake
• Has been operating at capacity for the last 3 years
• Expensive for Brazilian producers to export,
domestic focus (25:75)
• 1 new graphite mine project
Minas Gerais, Brazil

#2 Brazil
• Offers the most immediate potential for supply
increase
• 2 operating flake producers = total capacity
102,000 tpa
• 1 mothballed flake graphite mine
• Strong domestic market and export potential to
North America which relies on China and to a
lesser extent Canada and Europe
• 75% of production is domestically consumed at
present

#3 India
• Production hugely over estimated for years – 140,000
tpa, in reality 25-30,000 tpa
• Industry very fragmented
• No mines larger than 7,000 tpa
• Questions over how much flake is mined in India versus
how much imported from China and reprocessed
Jarkhand, India

#3 India
• Consolidation needed to be a major global graphite
exporter
• No exports – strong internal demand
• Imports from China
• Poor infrastructure major barrier to development

#4 Canada
• 2 operating mines, 1 major mine in Quebec = Lac des
Illes
• 15,000 tpa, predominately medium flake graphite
• Moved to a new mining pit = production good until
2015
• Consistent producer to global market for 20+ years
• Supplies North America and Europe

#4 Canada
• Mining suspended in 2013
• Slow market conditions, operating from inventory
• Large flake graphite questions
Exploration
• Post-boom era
• Serious graphite exploration companies now coming to
the fore
• Canada home to some major global projects
• Companies present: Syrah Resources (booth), Flinders
Resources

#5 Norway
• 2% of flake graphite output
• Underground mine in Skaland, north Norway
• Europe’s only miner
• No significant expansions are expected in the
medium term
Skaland, Norway

Resource management
• Environmental reasons commonly given
• But…China no longer wants to be the bread basket for the rest of the world
• Exports of raw materials at the expense of resources/environment no longer a
viable long term business
• The rare earths excuse
The China factor: production and policy
Macro changes in China:

Pollution controls
• Blanket ban on all round/downdraft kilns, Shanxi
• Heavily polluting, inefficient
• Had to covert rotary kilns or go bust
• 75% of producers wiped out overnight
• Prices up 70%
2007 – Refractory-grade bauxite
2009 – Flake Graphite, Inner Mongolia
2011 – Amorphous Graphite, Hunan
• Mine closures of older operations
• Pollution and demand grounds
• Government-forced consolidation in
Lutang
• Coal and amorphous graphite industries
• 220 mines to 30 on pollution and
resource protection grounds
2012 – Flake Graphite, Jixi, Heilongjiang

Developing a value-added economy
• Exports of raw materials at the expense of resources/environment no longer
viable
• Development of the production value-chain is critical
The 7 key industries China wants to develop
1. New energy
2. New energy automotive
3. New materials
4. Energy saving and environmental protection
5. Biological science
6. New information industry
7. High-end equipment manufacturing

2. Macro changes to mining in China
High quality, lower cost manufacturing
Consolidation – majority of production by the fewest companies
China wants to compete on quality and quantity
Output of top ten steel producers - % of total capacity

The China factor: production and policy
Graphite compared to other raw materials
The Kooroshy Commodity Chart
Source: Resources Futures, Chatham House, London

Exports to imports for raw materials
• 2000 average import dependency: 15%
• 2011 average import dependency: 40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Bauxite Copper Iron ore Coking
coal
Average
2000
2011
China’s dependency on imported raw materials
Note: China is a net exporter of natural graphite

The medium term future for China
• In need of modernisation
• Increased focus on more efficient graphite mining
• Consolidation in flake will happen = when?
• High potential for export supply restrictions in favour of
value-added products
• Net exporter of graphite for foreseeable future
• China is industry leading with commercial spherical graphite
• China will compete in other advanced battery materials

Exploration boom

Exploration boom
2010: 5 exploration companies
2011: 60 exploration companies
2012: 125 listed graphite exploration companies*
*Tech Metals Research
Graphite Production & Exploration Map: Free at UNITECR 2013

Prices
Volatility in commodity markets
Source: Resources Futures, Chatham House, London

Prices

Prices 2009-2013 – the era of volatility
2009
2010
2011
2012
2013
• Producers take capacity off-line in response to global economic crisis
• Destocking cycle ensues
• Markets rebound stronger than anticipated
• Suppliers cannot react quick enough, not enough inventory to satisfy
demand
• Supply shortage
• Price spike
• Flake graphite price reaches all time highs
• +80 mesh, 94-97% C, CIF, Europe = $2,500/tonne
• Situation + graphite’s green energy uses + no viable substitutes = boom
in new exploration
• H2 2012: Demand begins to slow
• H1 2013: Prices plummet as demand stagnates
• China significantly struggles for the first time

Price performance in 2013
Price trend in 2013:
2011: all time highs
Large flake
+80 mesh, 94-97% C, flake graphite, CIF, Europe
• 2000-2009 av: : $823/tonne
• September 2013: $1,350/tonne
Source: Industrial Minerals Data: Graphite price database - new
Indmin.com/GraphitePrices

Price performance in 2013
Medium flake
-100 mesh, 94-97% C, CIF, Europe
• 2000-2009 av: $650/tonne
• September 2013: $1,050/tonne
Source: Industrial Minerals Data: Graphite price database - new
Indmin.com/GraphitePrices

What does the future hold?
• China has the ability, production power, resources to continue supplying the
world like is has done so since 1980s
• Customer perspective is changing, however
• Supply security is high on the agenda = from the unknown of Chinese policy
(the rare earths situation)
• Wide agreement graphite has been neglected for a generation = major
interest in exploration scene
• Price volatility seen over last 5 years will continue as a result of changing
buying patterns, not necessarily through a demand squeeze

My 5-year expectations in 5 points:
1. China to remain #1, supply restrictions to increase
o Active: export quotas (magnesia, fluorspar, rare earths), tax increases =
less likely
o Passive: Environmental crackdown (wasteful mines, polluting plants,
uses of certain acids), consolidation = more likely
2. Supply to increase outside of China
o Expansions at existing mines: Brazil, Canada
o New mines: Africa, Canada
3. Supply chain integration
o Refractory producers especially, buy far largest volume consumers of
flake
o Users to buy or have a stake in mines
o A return to pre-1985 mentality

4. Large flake graphite production increase
o > 80 mesh, 94% C
o Through new mines outside of China = opportunity
o The emergence of a new category = Jumbo flake, > 48 mesh
5. Raw material competition
o Large flake graphite competition from batteries
o > 80 mesh and larger most suitable for spherical graphite
o New market which didn’t exist pre-2008
My 5-year expectations in 5 points:

Mike O’Driscoll,
Head of Research
Industrial Minerals Research
Email: modriscoll@indmin.com
Emma Hughes
Deputy Editor
Industrial Minerals
Email: ehughes@indmin.com
Ben Ash
Advertising & Sponsorship
Industrial Minerals
Email: bash@indmin.com

Graphite related products:
Industrial Minerals Data | Graphite = new
• www.indmin.com/GraphiteAnalysis
Natural Graphite Report 2012-2016
Supply, demand, price forecast
• Discounts at UNITECR, enquire at booth
Natural Graphite Global Map 2013/2014
Production, Confirmed Resources, Trade Flows
• Published in 3 weeks, last advertising positions
remaining

Thank you
smoores@indmin.com

Refractory grade graphite: Seeking Chinese supply diversification

Recommandé

Recommandé

Contenu connexe

Similaire à Refractory grade graphite: Seeking Chinese supply diversification

Similaire à Refractory grade graphite: Seeking Chinese supply diversification (20)

Plus de Simon Moores

Plus de Simon Moores (14)

Dernier

Dernier (20)

Refractory grade graphite: Seeking Chinese supply diversification