The synthetic graphite market is buckling under falling oil
prices, which hit their lowest levels in almost seven years
towards the end of 2015. Gerry Hand, vice president for
marketing at Chicago, US-based Superior Graphite, told
delegates at IM’s 5th
Graphite and Graphene Conference in London in December that the
decline has had a "devastating effect" on demand for synthetic
graphite products used in the oilfield market.
The effects of the price decline continue to "trickle
through the industry", Hand said, describing the market for
graphite in drilling as being "under siege". The number of
drilling rigs in the US has fallen to its lowest level since
April 2002 and is down 59% from its October 2014 peak. OPEC has
so far given no indication that crude oil production will be
curbed, and crude prices fell below $37/barrel (bbl) on the
Brent benchmark and below $40/bbl on the West Texas
Intermediate (WTI) in December – their lowest for
nearly seven years.
"[The industry is] building around 2m barrels per day in
inventory – that’s only going to keep
things depressed," said Hand. He described predictions that
Brent prices would reach $100/bbl by 2018 as "optimistic".
Goldman Sachs has said that prices could fall as low as
Graphite is used in drilling fluids to provide lubrication.
It also helps control fluid loss and strengthen wellbores. Its
flexibility ensures the effective sealing of apertures, even in
situations where wellbore pressures vary.
Conditions are little better in the steel industry, which
uses synthetic graphite in the form of electrodes for steel
furnaces. "Electrode prices are lower than I can remember and
show no signs of recovering," Hand said, adding that the
recarburiser market, which serves the iron and steel sectors,
is also experiencing downward price pressure.
Cristoph Frey, managing director of ProGraphite, noted that
the low oil price would also lead to less demand for synthetic
graphite from the steel industry, partly because of the wider
economic conditions associated with low oil prices but also
because of the decline in demand for steel tube and pipe
products used by the hydrocarbons industry.
A green lining
With traditional markets for both natural and synthetic
graphite either flat or in decline, green energy applications
remain the focus of growth projections for the graphite
Lithium-ion (Li-ion) batteries are credited by many as being
the sector with the greatest growth potential, although Corey
Nolan, CEO of ASX-listed graphite junior, Sayona Mining Ltd,
admitted that the so-called "green energy revolution" is not
yet "as strong as hoped".
Li-ion is expected to provide 300,000 MWh of energy by 2025,
of which 100,000 MWh will be accounted for by electronic
vehicles (EVs), ProGraphite’s Frey said.
Graphite’s status as the dominant material in
the production of anodes for Li-ion batteries seems secure for
now. "New developments are on the way, but it takes years to
get from research to mass production," Frey said.
The Li-ion battery market currently requires 70,000 tpa
anode material, with graphite accounting for 95% of this. But
as this figure increases – to 160,000 tpa in 2020 and
270,000 tpa in 2025 – graphite’s market
share will decrease slightly, to 91% in 2020 and 88% in
Of this, the demand for natural graphite should increase by
70,000 tpa by 2020 and 151,000 tpa by 2025, Frey said. Natural
graphite currently accounts for 55% of carbon used in the anode
market, with synthetic graphite making up the remaining
Hand also highlighted fuel cells as a promising new demand
area. He said that the fuel cell market was growing at a
compound annual growth rate of around 29%. "Not every fuel cell
uses graphite, but some do, and this is a bright spot for the
industry," said Hand.