In what proved to be yet another tough year for demand and
prices across all grades of graphite, 2015 was also remarkable
for the expanding size of the exploration sector. Undeterred by
markets hitting four-year lows, weighed down by stagnant demand
from traditional consumers and delayed growth in the battery
market, a handful of new graphite mining businesses emerged
over the year, while other multi-mineral explorers also decided
to dabble in the sector.
Perhaps the hardest thing to swallow about 2015 was that
despite the dauntless optimism of the junior graphite sector,
the two most recently reopened producers –
TSX-V-listed Flinders Resources Ltd and ASX-listed Valence
Industries Ltd – were forced to suspend operations
just months after opening.
Flinders’ Woxna mine went into operation at the
end of 2014, but when a deal to acquire Mexico-focused Canadian
mining business Big North Graphite Corp. collapsed in January
after the latter failed to satisfy due diligence requirements,
keeping afloat proved too big an ask for Flinders. The company
paused operations in June, saying it would keep the facility
"production-ready" until demand and prices improved.
Valence Industries, meanwhile, was forced to halt production
at the Uley plant in South Australia in December, having only
come into full production the previous June.
In Madagascar, UK AIM-listed StratMin Global Resources Plc,
which reopened the Loharano mine towards the end of 2014 ramped
up operations over the course of 2015 and in December announced
that it had achieved "operational breakeven".
Elsewhere, Magnesita Refratarios’ decision to
abandon its Almenara graphite project in Brazil in the first
quarter of this year left South American graphite production
primarily in the hands of Brazilian miner Nacional de Grafite.
This company is believed to be operating at reduced levels,
along with Imerys Graphite and Carbon, which is understood to
have scaled back output at its Lac des Iles mine in Quebec,
In China, despite closures of a number of graphite
processing facilities on environmental grounds,
IM understands that efforts to curb Chinese
graphite output and consolidate the sector have so far been
relatively ineffective. Production remains at high levels while
mines have the potential to be exploited for many more
Exports of Sri Lankan vein graphite remain at low levels,
but an anticipated downward revision in export prices was
cancelled in the second half of the year, with the Sri Lankan
government opting to wait and see what happens in the Chinese
There remains no shortage of new production potential,
however, with new graphite projects appearing in Canada,
Africa, Brazil, Europe and Australia over 2015.
Declining graphite consumption from struggling end use
sectors for graphite, from traditional markets such as
refractories, gaskets and lubricants through to battery
applications, emphasised the extent of graphite overcapacity in
the market in 2015. The graphite industry is not one that
habitually stockpiles material, meaning that the problem is one
of capacity rather than excess production.
This situation set the tone for the entirety of the year.
Small pockets of demand revival were seen following and
preceding Chinese winter closures in March and November,
respectively, and after rounds of aggressive discounting by
producers and traders, were not sustained.
Refractories continue to be the single largest end market
for graphite, so the ongoing demise of the global steel
industry is guiding the demand trend down. For synthetic
graphite, the drop in steel electrode consumption is also
having a negative impact on this industry.
The recovery of the graphite market is beyond its own
control, since even production cuts are unlikely to revive
prices without a significant rise in demand, which, at the end
of 2015 did not appear to be on the horizon. Shrinking demand
has disrupted the entire supply chain.
The graphite industry entered 2015 expecting to see prices
fall and the first quarter of the year was characterised by
modest declines, which were confirmed by a decisive shift down
in flake values in May, when IM found that
some prices had touched levels not seen since 2011.
Currency fluctuations also came into play during the year,
to the detriment of graphite prices. The June to August period
was volatile for graphite trading, however relative stability
in flake graphite prices crept in at the end of Q3 and appeared
to hold for the remainder of the year.
Prices for amorphous graphite are coming under pressure from
coke substitutes. In October, sources told IM
that coke shipments from Russia, which has been an intermittent
producer of graphite in the past, were reaching European
customers seeking to replace natural amorphous graphite with
Prices for refractory grades of graphite are unlikely to
improve until the second half of next year, or more likely
until 2017, IM learned at the 5th
Graphite and Graphene Conference in December. The
apparent rise in demand for battery grade graphite has yet to
materialise, traders said, noting that even prices for
spherical graphite are stationary.
Industry observers do not expect graphite prices to improve
before H2 2016 and with supply showing no signs of letting up,
any increase will depend on a rise in demand, either from
traditional markets or for the battery sector.
Some have suggested that if consumption of graphite in
batteries rises sharply, there could be a brief shortage in
spherical graphite availability, however this will not
necessarily shift concentrate prices.
On the corporate front, predictions that graphite
exploration companies would begin to disappear from public
exchanges owing to a lack of funding to advance operations or
meet bourse requirements did not look to be imminent at the end
Brazil is no longer expected to be the source of near term
new supply, with eyes turning to large new projects underway in
In Sri Lanka, the high concentration of new production
capacity under development could pull prices down unless there
is a reversal in the demand trend for high purity vein