Stricter inspections in China force graphite prices up

By Davide Ghilotti
Published: Friday, 25 August 2017

Government inspectors return to Shandong for a second round of checks, making production at local graphite operations intermittent, as limitations to acid-purification processes is affecting high-purity and plus mesh sizes in particular.

Renewed environmental controls in China’s Shandong province have prompted an increase in graphite prices, with production of high-purity material and plus mesh sizes particularly affected by the inspections.

According to a 24 August IM assessment, a number of graphite grades bound for export have appreciated further.

Plus mesh size products are in tight supply at the moment, according to local sellers, who listed especially +50 and +80 mesh material sizes.

The shortage was prompted by a number of factors in production areas, including drought problems in Shandong province and a limitation to dynamite usage during mining, which affected production.

Production was scarce also in Inner Mongolia and, in Hebei, output decreased due to safety controls in the area in preparation for the 2022 Winter Olympic Games being held there.

Jixi continues to produce but volumes are limited.

FOB China prices for graphite 85-87% C, +100 mesh, have increased to $570-600/tonne.

Higher-purity 94-97% C, +100 mesh has meanwhile surged to $800-940/tonne; +80 mesh material rose to $900-1,060/tonne.

"More expandable graphite producers entered the market, and they need a lot of plus mesh products", one producer in China said.

Some market participants suggested that speculation may be having an impact.

"Speculation is another problem. People who used to invest in bentonite or other minerals before, now started to invest in graphite – buy as much graphite as they can and sell it later for profit, which is totally understandable," the producer added.

Minus mesh and high-purity

Commenting on minus mesh material prices, one producer in southern China told IM: "For minus mesh size products, supply is sufficient, but prices have increased a little following the plus mesh surge."

The increase is however contained compared with the heights the commodity reached in 2010-2011, he added: "Now this material is priced about Chinese renminbi (Rmb) 3,200/tonne ex-works including VAT, for 95% C -100 mesh. Eight years ago, this was Rmb 5,200/tonne."

Prices for 94-97% C, -100 mesh increased slightly to $505-690/tonne, while 90% C, -100 mesh remain at $370-400/tonne.

"Prices also surged for high purity products like 98-99% C content, again because environmental inspections limiting output," said one trader in north-eastern China.

"In fact, production is heavily affected for any product using acid for purification and producing waste water. It is very difficult to meet these high environmental standards: production in Laixi and Pingdu has basically stopped."

Another producer in Shandong added that, with the appointment of the new minister of China Ministry of Environmental Protection in June, the harsh stance of the authority against industrial pollution has intensified further.

"He wants to cover all provinces in China – not just once, but several times," the producer told IM. "Now that the inspection team is stationed in Shandong, producers are cautious. They don’t want any trouble, so they’d rather stop production for a while than being fined or, worse, shut."

"The government is requiring all factories to switch from coal to gas but there is no deadline yet. This will lead to more pressures on local producers," the source added. 

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