Fastmarkets tracks evolving graphite market with new pricing instruments

By Davide Ghilotti, Jon Stibbs
Published: Tuesday, 04 June 2019

Fastmarkets has begun price assessments of single carbon-grade, fixed mesh-size flake graphite because the evolution of the market demands greater depth and detail of pricing data for the industry. It is also launching a tool to calculate prices for different grades of flake material.

Fastmarkets has strengthened its pricing of the natural graphite market with the launch of six flake graphite price assessments, in response to market feedback and changes in the industry.

Fastmarkets, and Industrial Minerals previously, has been pricing graphite for more than 30 years, with the first assessments introduced in 1988.

During this time, it closely tracked the graphite boom of the middle 2000s, which saw a flurry of demand and market prices surging in the periods 2009-10 and 2011-12. Anyone involved in the market will remember that the market then responded with a new inflow of supply, particularly from China, until the market collapsed.

The international trade found itself dogged by oversupply and experiencing a contraction in demand, and the prices of all the main graphite grades (including flake, amorphous and spherical) went through a prolonged bear phase that lasted from 2012 until around 2017.

By that time, supply disruptions in China, related to the country’s environmental policies, and a combined return of demand from the main consuming markets, helped to raise market prices back to more sustainable levels.

Approaching the second half of 2019, new supply patterns are putting downward pressure on prices once again, and market participants are eager to see whether a supply/demand balance can be maintained.

Throughout the years of upheaval, Fastmarkets’ pricing assessments for flake graphite consisted of a number of grades that were brought together into combined price ranges.

For example, a price range for graphite, flake, 94-97% C, +80 mesh, US$ per tonne, cif Europe, would provide an assessment for any flake graphite material, at that mesh size, with a carbon content ranging from 94% C to 97% C.

This was the structure that the main flake graphite prices had followed since they were first set up. It was intended to track the price movements that were taking place across a large number of sub-markets involving graphite.

Fastmarkets’ decision to opt for assessments of single mesh size and multiple carbon contents will allow our reporters to keep track of a fast-growing market that is expanding in many directions simultaneously, while producing price points that are digestible and representative of key market trends.

Evolving markets: moving to single product pricing

The industry and the graphite market as a whole have evolved since 2017.

With mineral commodity markets gaining increased prominence, the need for transparent and trackable information is growing. The requirements of Fastmarkets’ subscribers are evolving as well, and the feedback gathered over the past year on graphite pointed in one clear direction: the need to deliver single product pricing information on flake graphite.

The launch of the new flake graphite price assessments is intended to meet this demand.

The use of standalone price assessments for single product grades, rather than one assessment incorporating four different grades in one range, will allow subscribers to better engage with the graphite pricing information that Fastmarkets provides, making it easier for users to track and use this data.

In order to do so, Fastmarkets will be tracking one base grade material (where most market liquidity can be found), and also providing an indicator tool (known as Value In Use, or VIU) for the assessment of grades other than the base grade.

In future, Fastmarkets’ price assessments for flake graphite will track material of single carbon content and single mesh size, taking 94% C as the base grade, while maintaining three separate assessments for the main mesh size materials - +80, +100 and -100 mesh.

VIU graph

Introduction of a new indicator tool

The Carbon-VIU is intended to measure, in percentage terms, the market’s opinion of the price value of a 1% change in carbon content.

The VIU will be calculated through the analysis of all data collected by Fastmarkets for material ranging from 94% to 97% carbon. To achieve this, our reporters will continue to collect data points across the 94-97% C range.

The VIU shown will be the value implied by the market and not an in-house assessment. This will allow for a calculated linear adjustment to be applied to the base specification, depending on carbon content.

To give an example of what the carbon-VIU means in practical usage: A published Carbon-VIU of 7% will mean that material with 95% carbon content is priced by the market, on average, as being 7% more expensive than 94% carbon content material, assuming that other factors remain equal.

In the same way, it will mean that 96% carbon content material is 7% more expensive than 95% material; and that 97% carbon content material is 7% more expensive than 96% material, or 21% more expensive than 94% carbon.

The accompanying chart, relevant to May 30 this year, shows how the VIU calculator can be used by applying a percentage premium to the 94% C base price as carbon content increases. Regression analysis will be used to determine the relationship between our base specification and other graphite products with varying carbon content.

Please get in touch with the graphite pricing team if you have any questions about this change, if you would like to receive our weekly graphite newsletter, or if you would like to be a data submitter.

Contact Davide Ghilotti by email at: pricing@indmin.com and use the subject heading 'FAO: Davide Ghilotti, re: graphite.’



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