The consolidation of Chinas amorphous
graphite industry is set to impact the supply demand balance
for 2012 and 2013 and will result in a loss of global
The continuing government-backed consolidation
Hunan province is seeing over 230 mines reduced to
The majority of active mines in the Lutang area
are small to medium size sites that have been active for
decades, but there have been questions over their safety and
This has forced the government to close and merge
the vast majority of the mines, which are now all run through
Chenzhou Lutang Hunan.
As reported by IM, the overhaul
which began in September 2011 will see a
significant loss of supply from an area famed for producing 96%
of the worlds amorphous graphite. Production capacity
will fall from 600,000 tpa to a capped 510,000 tpa.
This has come about because of Chinas
desperation to control its mining industry. Until now many of
its major industries including coal, phosphate rock and
graphite have been a collection of many small to medium mines.
Mining has developed and sprawled over the last 30
Chinas goal is to have a handful of major producers
controlling the vast majority of supply. It allows the
government to closely monitor and control supply.
This is much like the
rare earths industry, in which one significant mine in
Inner Mongolia feeds into a centralised processing plant
a neat package that is easy to monitor and control.
Phosphate has also seen a similar situation with the
government handing out free loans to the industrys
biggest producers to buy out smaller competitors in
essence forcing consolidation.
Graphite is next on the agenda.
The loss of 100,000 tpa will be noticeable. This
equates to 10% of annual global
graphite supply or 16% of the amorphous market, according
to IMs Natural Graphite Report
This is also a supply shortage that no other
country in the world has the capacity or capability to fill in
the short to medium term despite there being
amorphous mines in Mexico and Austria.
The question remains whether buyers of the lower
value amorphous graphite used in many products including
in lubricants, in refractories and as a steel additive
will switch to the higher value flake graphite to fill the
There could also be a situation where flake
graphite fines are in higher demand this is the
lower-end of the flake market and a product that every mine
produces and sells in abundance.
One amorphous graphite company told IM: For
end markets industry will change to fine flakes, but for
many applications that will not be possible, so producers will
have to change to other sources of amorphous or to alternative
materials like carbon black.
There is a significant price disparity between
amorphous and even the lower end of the flake market. Today amorphous
graphite sells for $500-800/tone, depending on the carbon
content which ranges from 70% to 85%.
Consumers of flake face prices of at least
$1,500/tonne at the lower end and $2,500/tonne for higher end
products, with higher purity and larger flake size.
Graphite prices across the board have been rising
for the last 18 months on the back of a supply squeeze taking
the industry to price levels rarely ever seen. The amorphous
situation in China, although expected, will start to have an
impact from now until the end of 2012.
The industry will now wait to see how amorphous
prices will react, what the Chinese suppliers will sell their
products for in the wake of this increased bargaining power,
and the knock-on effect to the flake market.
For queries about IM's upcoming Natural Graphite Report
2012 contact Simon Moores on firstname.lastname@example.org