Heilongjiang, China announces plans to clean up graphite industry

By Simon Moores, Albert Li
Published: Wednesday, 16 April 2014

Consolidation nation: World’s leading flake graphite region to crack down on polluting operations in 2014 and consolidate mines by 2015; global supply and price impact expected to be significant

The world’s leading flake graphite producing region has revealed plans that could significantly alter the global supply structure of the industry.

After a number of years of speculation, Heilongjiang province in China has officially announced plans to crack down on polluting flake graphite operations and start consolidation of the mines within the next 18 months.
 
This has put a question mark over the future of the world’s largest flake graphite producing region, with the province accounting for 45% of Chinese production and 29% of global output in 2013. It will also come as a major boost to every new graphite exploration project looking to enter the market in the next three years.

The move follows high profile graphite dust and wastewater problems in Pingdu City, Shandong province – the country’s third largest producing region – which led to the ongoing blanket closure of all processing operations in December 2013.
 
The majority of the world’s medium flake graphite – used in variety of applications from refractories and lubricants to lithium-ion batteries – comes from Heilongjiang. This includes the industry’s most widely used product, -100 mesh, 94% C (-194).

Six steps to clean up Heilongjiang
Heilongjiang’s Provincial Department of Environmental Protection has announced 6 steps to turn what is mass scale mining into a more efficient and responsible operation and eventually create higher value-added products.
 
1. Consolidation
 
The provincial government plans to consolidate 36 mining rights into 30 by 2015, and into 25 by 2020.

As well as having areas dedicated to key mining operations and exploration, the government plans to identify areas in which mining is explicitly encouraged or discouraged. It hopes to develop these more concentrated and controlled areas of operation to shift away from the sprawling mining activity seen today.

This will also allow the ministry to establish greater control over the area’s mining rights and limit illegal operations.
 
2. Dust control
 
Much like in Pingdu, a major focus of Heilongjiang’s clean-up is controlling the amount of dust produced through graphite mining and processing.
 
Dust emissions have become a major issue in China’s flake graphite industry and while the mineral is inert and not harmful, air pollution has become a problem for local residents and farmers, who have coined the term ‘graphite rain’ to describe the thick pollution.
 
Getting a grip on the dust problem through the introduction of stricter regulation and more modern equipment will be a cornerstone of the plan.
 
The government has issued all producers with a dictat to upgrade their equipment for inspection from 1st September 2014. Those that fail this inspection will be forced to stop production.
 
3. Value-added products
 
The government wants to establish hi-tech industrial parks to produce value-added graphite products and move the province away from its role as a concentrate supplier.
 
The local towns of Jixi and Hegang (Luobei) have been identified as initial locations for the parks which will replicate what has been achieved in Inner Mongolia and Hubei’s graphite industries.
 
4. Entrance standards
 
The Ministry of Industry and Information Technology will tightly enforce graphite industry entrance standards; rules that will limit new capacity and control expansions.

Newly built graphite plants will not be allowed to have a capacity of less than 20,000 tpa, with individual production lines required to process at least 5,000 tpa.
 
5. Tailing pond safety
 
Another major environmental issue surrounding the country’s graphite production is how waste water is disposed of.
 
Subsequently, the Department of Safety and Inspection will now review the safety of the province’s graphite tailing ponds, approve and distribute certificates, and shut down illegal ponds or those beyond rectification.
 
6. Green Mines

The first five points are all designed to establish what China calls “Green Mines”. Heilongjiang aims not only improve the ecological environment from these measures but will also try to bring all graphite mines in the area up to provincial and national green mine standards over the next five years.

What will the impact be?
 
By Simon Moores in London

It really depends how seriously the Heilongjiang government takes this plan.
 
On the face of it, the plan looks extensive, more so than any in recent history for the graphite industry. But we will only know the seriousness of the situation by 1st September when the government begins its inspections.
 
The industry could be hit with a double whammy whereby the majority of production in Pingdu, Shandong does not come back on stream in June/July and then further closures come into place in Heilongjiang in September.

Our estimations are that this could put at least 50% of flake graphite supply from both provinces under threat throughout 2014. This equates to 24% or 90,000 tonnes of global flake graphite output in 2013.

Depending on how demand plays out in 2014 and 2015, the impact on prices could also be significant.
 
Supply and demand for flake graphite is finely balanced. The last time demand rebounded from a slump was in 2010-2011 when prices rocketed to all-time highs off the back of limited supply and an unforeseen demand surge.
 
At that time there were no real supply restrictions in place.
 
We could be entering a similar period for the industry now. Demand has been low for the last 18 months which has seen prices erode and capacity come off-stream around the world. We are yet to see any significant demand upturn, but should any rebound coincide with supply cuts in China then prices could once again increase significantly.

Free special report available here IM Data | Graphite - China: Consolidation nation



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  • Michael Field | 02 May 2014, 1:36 AM

    We recently put together an info graphic on the benefits of graphite, check it out here
    https://www.youtube.com/watch?v=EtAty4Fkr84

    - Michael Field