Graphite pollution fears spread to Heilongjiang, China

By Albert Li, Andrew Miller
Published: Friday, 17 January 2014

Environmental pressures reach world’s premier flake graphite region; ‘Graphite rain’ covers local villages

Albert Li, Shanghai 

Andy Miller, London 

Graphite production in Heilongjiang province is under the spotlight following pollution complaints which could lead to restrictions in the world's leading producing region. Similar complaints in Shandong province only in December led to the temporary closure of all processing plants.  

Graphite dust has contributed to severe air and water pollution in Luobei County and Jixi City, creating what is being described as ‘graphite rain’. This has sparked complaints from both residents and business owners which has thrust the province, which produces 43% of the world's 420,000 tpa flake graphite in 2012, into the spotlight. 

Pollution is affecting the health of the local population as well as blighting the area’s farming industry, reports in China say. Furthermore, according to locals, failure to prevent unofficial mining operations has compounded these issues by destroying the region’s landscape.

While recent government rulings have required companies in some areas to invest in more environmentally friendly processing infrastructure, the failure of local governments in regulating Heilongjiang’s graphite sector has caused resource depletion, an inefficient industrial structure and heavy pollution.

This news follows the more significant closures of graphite mines in Pingdu where eight companies have already been shut-down and several more are awaiting government approval to restart production.

Up to 55 graphite operations were suspended in Shandong Province at the end of 2013 as surprise spot-checks revealed a range of environmental concerns. While not yet reaching this level, similar revelations about production practices in Heilongjiang Province now threaten to fuel further intervention in an even more critical region.

The importance of Heilongjiang

According to Industrial Minerals’ Natural Graphite Report 2012-2016, Heilongjiang accounts for close to half of China’s total flake graphite production capacity, meaning any type of suspension or consolidation could have major repercussions for the global market.   

Although the ownership structure of operations in Heilongjiang may prevent this type of intervention immediately, growing pressures to limit pollution may be used as a means of improving the structure of the industry in the longer-term.

There are currently nine major flake graphite producers based in Heilongjiang, more than in any other region in China. 

Luobei County and Jixi City, the two graphite producing areas in the region, host the largest mines in the country however industry experts fear that the region’s resources could be depleted in as little as 20 years if mining practices continue at their current speed.

Many companies in the region are thought to be using processing equipment which is up to 30 years old.  As well as affecting the efficiency of production in the region, it is also having a more pressing impact on the local environment.

Despite some efforts to encourage investment in improving the sustainability of production, heavy pollution persists.

In the Mashan district, for instance, companies have been required to invest between RMB 1.5 – 2m ($250,000 – $330,000) to update processing equipment, storing methods and transportation infrastructure. Nevertheless, graphite dust continues to blight local homes and crops, while tailing ponds pollute water supplies.  

As the national government pushes ahead with plans to improve both the country’s environmental sustainability and the efficiency of production, heavy pollution could incite further intervention from industry regulators.  

Rare earth comparisons

The importance of the flake graphite industry to the local economy makes it unlikely that production will be completely suspended as the provincial government pursues market improvements. Graphite companies are a source of significant investment in the region.

This does not, however, override the requirement for reform. A number of parallels have been drawn between today's state of the graphite market and the previous situation in the rare earths industry.

Out of date infrastructure, poorly regulated markets and inefficient production methods mean pressure for industrial change is growing. Whether environmental pressures will provoke significant action is yet to be seen. 

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Industrial Minerals Data is: 

Simon Moores, Manager (London) - 
Shruti Salwan, Analyst (London) - 
Albert Li, Analyst (Shanghai) - 
Andy Miller, Junior Analyst (London) - 

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