By Gary Economo, CEO, Focus
Domestic demand is expected to push Chinas production of
crystalline flake graphite to just under one million tonnes
over the next three years.
Roughly, thats a 40% increase
from 2010 production levels of 650,000 tpa.
While those growth rates are
generally in line with global market demand projections to 2015
and beyond, there is no indication yet as to what portion of
Chinas production growth is destined for its domestic
industrial and high-value technology markets.
The United States Geological Survey
(USGS) said in its 2013 flake graphite report, that some 800m
tonnes of natural crystalline graphite is exploitable
The graphite industry should learn
from the lessons of history to gird itself against the risks
attached to overcapacity of supply - even at times of a bullish
Looking forward, our view is that
current prices for both industrial and technology grade
graphite is unsustainable and that a market price correction
based on end-user demand will force an industry-wide
Carbon components manufactured for
and consumed by mass producers in the automotive, consumer
electronics, aviation and clean energy sectors are now, and
will continue to be vital contributors to industrialised
nations economic recovery and growth in the
2013-2014 may well become a period
of consolidation bringing a new wave of mergers and
acquisitions among the owners of some 80 graphite development
The graphite market is changing
dramatically. New applications for carbon composites are
driving change on an industrial scale, from China to Germany to
the US to Brazil.
This change is exemplified in the
current wave of planning articulated by end-users in
their specification requirements for future high-purity
For example, battery
manufacturers costs in 2012 for graphite anode material
was approximately $5,000/tonne.
The electric vehicle market needs
one of two things to be successful:
- Either the price per tonne
of anode materials needs to be pared back to the $1500/tonne
- The same anode needs to be
capable of producing four times more energy capacity.
It is possible to achieve both.
Customers are demanding better
prices in order to be globally competitive over the next five
to 10 years.
Competitive necessity requires
producers to have the in-house capability of matching customers
niche, technical requirements. Purification outsourcing adds
additional cost layers.
The challenge going forward today
is to protect both shareholders and business operations from
Risk protection to us is based upon
a four point formula:
- Know your customers
needs. Secure them with quality product and competitive
- Invest, then continue to
invest in the creation of new and existing cost-mitigating
- Leverage the advantage of
your graphite deposit by creating a cutting edge, high
technology graphene business component,
- Expand your high-grade
graphite assets - domestically and globally - to support your
long-term, competitive market position
Pursuing a technology agenda means
sustainable, long-term profitability.
A lithium-ion battery, used in electric vehicles.
This battery is used in the Nissan LEAF. The
company announced in January that it was able
to reduce the cost of its all-electric fleet.
Innovation means looking beyond the
borders of a graphite mining property and to future
The emergence of graphene - derived
from crystalline flake graphite - provided an opportunity for
investigation and ultimately, action.
Graphene has taken on a life of its
own. Applications are being developed individually and through
partnerships with some of the largest industrial institutions
in the world.
There is the potential for graphene
to spawn a second industrial revolution during this decade.
There is also the possibility that graphene market monetisation
will begin to take place within the next 12 to 24 months,
driven by demand from the green energy and infrastructural
All players in the graphite sector
need to up their game in the near-term by broadening their
business strategies to meet the challenges of change
Cost-mitigating technologies are
critical to securing market share, profitability and
ultimately, increasing shareholder value.
About the Author:
*Gary Economo is president and CEO of Focus Graphite
Inc., owner of the Lac Knife, Quebec high-grade graphite
deposit and, president and CEO of Grafoid Inc., the graphene
investment and application development company.