Graphite outlook: Q3 2014

By Andrew Miller
Published: Friday, 04 July 2014

July 2014 - Graphite trends

Flake graphite prices remained stable moving into Q2 2014, however news of further Chinese consolidation plans soon applied upward pressure to the market as the risk of longer term supply issues increased.

In mid-April 2014, Heilongjiang – the largest flake graphite producing region in China – announced plans to begin a programme of consolidation which will run through to 2020.

These plans are focused on eliminating environmental pollution, reducing the number of active producers and enforcing industry entrance standards to increase productivity and efficiency.

As a result of this news, Chinese suppliers attempted toleverage higher prices in early May, increasing their offers by as much as $200/tonne. 

While weak demand prevented deals being settled at these levels, increases were evident throughout May, with prices eventually settling at around $50/tonne higher by the start of June for medium-large mesh grades.

Lower value grades proved more resilient to this trend, however, as excess output continued to weigh heaviest on this area of the market.

Although output from Heilongjiang province slowed throughout the quarter to combat overcapacity issues, production is expected to ramp up once again in Q3 2014, which could see prices slip back to previous levels if summer consumption fails to improve.

As attempts to use supply restrictions managed to finally lift flake concentrate prices from four year lows, increases failed to filter through to the spherical graphite market.

IM Data sources reported higher offers in the region of 5-10%, however this failed to stimulate price increases despite resilient demand and the ongoing excitement surrounding Tesla’s plans to open the world’s first battery gigafactory.

In the amorphous graphite sector, prices slumped by as much as 18% throughout Q2 as China’s sole producer, South Graphite, lowered prices to clear existing stockpiles and regain market share, particularly within Asia.

With the country accounting for around 90% of global production, the move has made the market increasingly difficult for peripheral producers who are having to compete with lower carbon substitutes in many markets.

Elsewhere, Sri Lanka’s Ministry of Industrial Commerce has begun a review of its annual pricing strategy, as weak market conditions have forced producers to consider lowering prices which have been stable for over two years.

To download the full Graphite outlook: Q3 2014, please click here.

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