How healthy is refractory grade graphite supply?

By Simon Moores
Published: Wednesday, 24 October 2012

Buyers of refractory-grade graphite face an uncertain future after a combination of production issues together with increased demand competition have come into play at the same time.

Buyers of refractory-grade graphite face an uncertain future after a combination of production issues together with increased demand competition have come into play at the same time.

New Data from Industrial Minerals Research’s Natural Graphite Report 2012, highlight that only one of the top five suppliers of flake graphite are increasing production.

Comparing 2010 to 2011 - a period of solid demand for graphite - only Brazil increased its output, China and Canada has remained static, and India and North Korea fell.

Refractories drive natural graphite demand, accounting for 38% total consumption in 2011, by far the largest market.

China, the world’s biggest producer of refractory grade graphite - a product in excess of 80% carbon content and 100 mesh in size or larger - has held production output. But decreases elsewhere around the world has strengthened its position, meaning it now holds 77% of world supply of refractory grade graphite.

Its share of world flake graphite production also rose, to 67%.

In terms of Chinese mineral supply dominance, graphite is only behind rare earths (97%), refractory bauxite (95%) and fused magnesia (85%).

Brazil was the strongest performing country in 2011, increasing its output to capacity production of 96,000 tpa. The country is home to the world’s largest non-Chinese producer, Nacional de Grafite.

Indian production was the most significant revision after years of being overestimated.

The country has been attributed by many as producing 140,000 tpa, a figure wildly overestimated.

Actual production, as calculated by Industrial Minerals Research, is 35,000 tpa of flake graphite only, the majority of which is consumed in refractories to fuel India’s strong steel sector.

North Korea’s sole graphite miner faced the familiar problems dogging its mining industry with water, electricity availability and logistical problems hampering output. The 30,000 tpa produced is 100% captive supply for China.

Graphite’s production from the world’s fifth largest producer, Canada, was also static. The vast majority of the country’s production comes from one mine in Quebec operated by Timcal Ltd. A smaller operation in British Columbia is also active.



Refractories & EV batteries compete for raw material

Graphite buyers in the refractories industry have faced little competition for raw material for many years. A consistent, low cost supply of graphite from China has flowed into the west since new production came onto the world market in a major way in 1989.

This put many new, higher cost, operations out of business within four years, a situation which is on the surface very similar to today with a glut of new explorers entering the industry on the back of higher prices in 2010 and 2011.

Electric vehicle batteries, in which graphite is used as the anode material, have the potential to add a new layer of demand to graphite, taking it well above today’s 1.019m. tpa production levels.

This also adds a new risk factor for traditional buyers of graphite as batteries and refractories will go head to head for the same raw material. Producers of graphite will also face the decision to upgrade flake to higher value spherical graphite for batteries or sell the feedstock direct to refractory manufacturers, adding a new level of complexity to the industry as well as new demand.