Taking in hand: Chinas government is
pushing the consolidation of amorphous
graphite production in Hunan province.
Pictured is a graphite sample from
Qingdao Haida Graphite.
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 supply.
The continuing government-backed
consolidation programme in the Lutang area of Hunan province is
seeing over 230 mines reduced to 20.
The majority of active mines in
Lutang are small- to medium-size sites that have been active
for decades, but there have been questions over their safety
and environmental impact.
This has forced the government to
close and merge the vast majority of the mines, which are now
all run through a new entity called Southern Graphite Ltd.
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. 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 for the
government 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 90,000 tpa will be
noticeable. This equates to nearly 10% of annual global
graphite supply or 16% of the amorphous market, according to
IMs Natural Graphite Report 2012.
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 or
alternative minerals to fill the demand gap.
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 some 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
There is a significant price
disparity between amorphous and even the lower end of the flake
market. Today amorphous graphite sells for $500-800/tonne,
depending on the carbon content which ranges 70-85%.
Consumers of flake face prices of
at least $1,500/tonne at the lower end and $2,200/tonne for
higher end products, with higher purity and larger flake size.
In May 2012, graphite prices fell for the first time since 2009
- dropping 12%.
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.
GK expands in Germany
While a previously abundant graphite source may be heading into
undersupply, at the tighter end of the market there is
expansion on the cards - in the form of Graphit Kropfmuhl AG
(GK), which is to restart production at its Kropfmhl mine
in Germany on 21 June 2012.
GK is planning to produce an
eventual 5,000 tpa from the Kropfmuhl facility, originally
mothballed in 2005, with 500 tonnes targeted for its first year
of production. The company told IM that all of
this output will be used internally for the companys
graphite business, which produces concentrates, dispersions and
As GK processes around 24,000 tpa
graphite, output from Kropfmuhl will thus form a significant
part of the companys supply - reducing its dependence on
external sources such as China. The new production from
Kropfmuhl will supply GKs processing plants where,
depending on the purification method, it can be used in
many different grades, Thomas Junker, GKs
director of sales and marketing, told IM.
In addition to its reactivation
project in Germany, GK is looking to further strengthen its
internal graphite requirements through the development of a
project in Cabo del Gado province, Mozambique.
We expect to receive the
necessary extraction permits from the local mining authorities
before the end of the second quarter, which will enable us to
press on with planning and implementation, Junker
At present, GK sources graphite from external suppliers in
addition to its operations in Sri Lanka (through subsidiary
Bogala Graphite Lanka Ltd) and Zimbabwe (Zimbabwe German