The graphite sector may be heading back to overcapacity in
the near term should new production coming to the market cause
global supply to expand faster than demand, delegates heard at
the 7th Graphite and Graphene conference in London, held in
"We are looking to three years of tough times due to
overcapacity," Stephen Riddle, chief executive officer of US
graphite supplier Asbury Carbons, told delegates, citing
several new producers expected to come onstream between 2018
"New capacity [being added] this year will total 230,000
tonnes [per year], with 80,000 tpy more next year and an
additional 190,000 tpy added in 2020," Riddle estimated, based
on production forecasts from main miners outside China that are
currently in development.
This will add to existing production, which the US
Geological Survey (USGS) estimated to be as much as 1.2 million
tonnes in 2017. Fastmarkets’ research team
estimated last year’s total at 1.018 million
Total demand, on the other hand, is expected to reach
739,000 tonnes by 2020 based on all flake sizes, Riddle said.
Demand volume may even be as high as 1.05 million tonnes by
2020 in an "optimistic" scenario, he added.
Demand is set to increase following the expansion of the
battery industry and the growth of the electric vehicles (EV)
Most delegates canvassed at the conference by Fastmarkets
agreed that the battery sector will be the single largest area
of growth for graphite demand in the coming years.
Demand for natural flake graphite from the battery sector
will enjoy a compound average growth rate (CAGR) of 20.5% in
2017-25, reaching 198,000 tpy by 2025, according to Christoph
Frey, managing director of ProGraphite.
At the same time, Riddle expects that supply will outpace
demand despite the growth from battery-related consumption.
"In a scenario of realistic demand based on 739,000 tpy by
2020, new capacity will outpace demand by as much as 69% by
2020," he said. "Considering optimistic demand of 1.05 million
tpy [by 2020], overcapacity would still be 48%."
According to Riddle, the relatively low capex needed to set
up a graphite mining operation, compared with other mining
commodities, can lead to a high inflow of capital supporting
new graphite projects.
This, in turn, can result in a rapid increase in capacity to
the market in a short period, which would be faster than the
growth in demand needed to meet it.
"Investors assume that low capex results in low risk and are
thus willing to invest in new capacity faster than demand
grows," he said.
Additionally, the so-called China Factor may also come into
play - in the past, graphite capacity added in China was
sufficient to exceed demand levels and to create oversupply,
generating a long-lasting bearish effect on prices.