Graphite supply squeeze sparks China price rises

By Simon Moores
Published: Tuesday, 27 May 2014

List prices increase significantly despite slack demand; fears that Heilongjiang flake graphite action could spread to cleaner areas.

China’s flake graphite mining suspensions are causing some suppliers to increase list prices in anticipation of a possible supply squeeze.

Government-enforced shut downs in Shandong province and impending closures in Heilongjiang, due to unacceptable air and water pollution levels, have led some producers to hold back from the market in the hope that a tightening of supply will induce price rises.

A major producer in China explained to IM Data that its list prices have increased by between Chinese renminbi (Rmb) 1,000/tonne ($160*) and Rmb 1,500/tonne ($240) as a direct result of the potential closures.

The prices quoted are not seen as indicative of confirmed deals in the market. Accordingly, IM Data has retained its existing price levels.

Demand is still very weak across all major global markets. This is the first time the industry has seen such a significant demand slump from all markets and all regions of the world at the same time.

Should even a small amount of demand activity return, however, there is a risk of panic buying - behaviour that was a major contributing factor to the graphite price spikes seen in 2011.

With industrial markets showing slow signs of recovery, there is also a secondary risk that demand from refractories could return to significant levels at the same time as increased consumption from the battery sector. As both end-markets compete for the same raw material - medium flake graphite, 94% C (-194) - this could add further upward price pressure.

There are now also fears in China that the government’s focus on the worst offending area, Jixi, could spread to the cleaner producing area of the province, Luobei.

Jixi and Luobei together accounted for 45% of China’s 220,000 tpa flake output in 2013.

*Conversions made May 2014

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Simon Moores, Manager

Shruti Salwan, Analyst

Andy Miller, Analyst


Albert Li, Analyst