The graphite market will undergo a shift in structure and
pricing that could see China becoming a net importer of
natural graphite to meet forecast local demand for EV
batteries, according to Luke McFadyen of Syrah
Syrah, which brought online its Balama graphite mine in the
fourth quarter of last year, expects China to gradually turn
from being the single largest exporter of the mineral to an
importer, while the battery sector in the country develops.
"China’s industrialization is nearly at its end
– they’re just putting the finishing
touches to it now – [so] demand growth for graphite is
all dependent on electric vehicles," McFadyen, Syrah
Resources’ market analysis and economics manager,
said at the Advanced Automotive Batteries Conference in Mainz,
Germany, which ran January 29 to February 1.
Graphite demand from the EV sector was 60,000 tonnes in
2015. Annual demand for the battery anode material is forecast
to reach 350,000 tonnes by 2020, and 900,000 tonnes by 2025,
"The electric vehicle effect on demand for natural flake
graphite is significant and imminent," McFadyen said.
China currently accounts for more than 60% of the
world’s natural flake graphite production. The
country is also the main exporter of the mineral, although
domestic demand is increasing rapidly.
In the nine months to the end of September 2017, China
imported 2,852 tonnes of flake graphite, up by 250%
year-on-year, according to customs data. The country imported
around 900 tonnes in July 2017 alone - more than it bought in
the whole of 2014.
The value of these imports has more than doubled, rising by
215% to more than $1.2 million in 2017 from less than $400,000
in January-September 2016.
Various constraints during 2017 wreaked havoc in the local
Production in China’s Shandong province was hit
by environmental inspections and intermittent shutdowns.
Graphite prices have increased as a result of supply-demand
dynamics. Industrial Minerals assessed the price of graphite
flake, 94-97% C, +80 Mesh, at $1,050-1,210 per tonne fob
Qingdao on February 8, 2018, up by 45% from a year ago.
The necessary shift in China’s buying patterns
is likely to be a precursor to a shift in pricing structures in
the graphite market, triggering a shift away from fixed-price
long-term contracts, in favor of pricing linked to spot
"The last time this happened was in iron ore and
metallurgical coal in the early 2000s. [This shift in trade
flows] will fundamentally change the graphite market.
It’s like selling oil to Saudi Arabia," McFadyen
"[Graphite pricing mechanisms] might not become like gold or
oil, but it’s not unrealistic to say we could have
a situation [similar to what was seen in] metallurgical coal,"
As it stands, the structure of the market sees the majority
of graphite committed in long-term agreements, which should
protect prices from extreme volatility, conference delegates
"Theoretically, graphite prices shouldn’t
fall," McFayden said. "There’s not the spot
liquidity for prices to crash. Every tonne we mine is pre-sold.
This year , we’ll produce 160,000-180,000
tonnes of graphite, and 100% of that has been pre-sold. In
2019, we’ll produce 250,000-300,000 tonnes and the
reason we have that figure is because 100% of it is pre-sold.
So prices won’t crash."
Syrah’s production at the Balama mine in
Mozambique is scheduled to ramp up to 350,000 tonnes per
"We’re mopping up the incremental demand so
there’s not that excess supply [to cause prices to
fall]," McFayden added.
But in response to forecast
demand from anode producers and the electric vehicle sector,
Syrah is looking at options to further increase
Balama’s output profile.
"We’re looking at expansion, because the market
will need a lot more graphite in the not-too-distant future,"
McFayden said. "We’ve known about the [Balama]
deposit for 130 years, it just took something like electric
vehicles for it to be induced."