Followers of the graphite market quite often hear mining
companies say that the natural form of the carbon mineral is
cheaper than the equivalent synthetic graphite, especially when
it comes to battery applications.
While there is some justification for this claim, the truth
is not as simple as many suggest.
Natural large-flake graphite can be mined relatively cheaply
in large quantities, but it must be put through several stages
of meticulous and highly technical processing before it has the
right structure and purity to be used in battery anodes.
Synthetic material, on the other hand, is produced in small
batches from often expensive carbon precursors that must be
heated (calcined) to extremely high temperatures in specially
But according to end-users in the lithium-ion battery supply
chain - who buy graphite from select suppliers, based on its
quality, uniformity and reliability - prices for natural
graphite are similar to those for the synthetic alternative
when battery materials made from one or the other source are
Each processing stage required to bring natural graphite up
to battery-grade standard is performed by specialists with a
minimum of four different steps in the battery supply chain,
whereas the synthetic value chain is much shorter and more
concentrated (and usually comprises only two steps).
Total global supply of synthetic graphite, including all
material earmarked for batteries, electrodes and speciality
applications, is estimated by the industry to be around 1.5
million tonnes per year. The size of the natural flake graphite
market, for all applications, is around two-thirds of that, at
1 million tpy.
Synthetic graphite suddenly gained prominence in 2017, when
a global shortage of needle coke, the main feedstock for
synthetic graphite, sent prices rocketing.
The shortages were caused by a combination of
environmentally driven closures among needle coke plants and
steel blast furnaces in China, consequent surging demand for
electrodes for use in electric-arc steel furnaces (EAFs), and
rapidly increasing consumption of graphite anodes in
lithium-ion batteries for use in electric vehicles.
Only around 10% of annual synthetic graphite output is used
in the lithium-ion battery anode market, with most of the rest
going into electrodes. But due to the speed of growth in the
battery sector, much of the focus has been on demand from this
Overall, synthetic graphite consumption currently equals or
slightly exceeds supply, which has resulted in tightness in the
market over the past two years.
The majority of anode-grade synthetic graphite material is
produced in China and is either consumed domestically, or
exported to further processors in Japan and South Korea.
Domestic trading tends to be peer-to-peer on a spot basis,
while exports are typically sold on short-term contracts.
Graphite electrodes are produced in bulk and traded like a
Well-known graphite electrode traders include
Switzerland-based CM Swiss; UAE-based DEG Trading; US-based
GES; and a number of Chinese companies, such as Duranice
Applied Materials (Dalian), Graffie Import & Export
(Dalian), Handan Yongsheng Carbon, Honor Group, Kaiheng
Commerce & Trade, Ma’s Group, Shanghai Carbon
International Trade, and Yeson International Trading.
The largest market for synthetic graphite is for ultra-high
purity (UHP) electrodes. In China, there is also a large market
for non-UHP electrodes, supplying furnaces that produce
In addition, there are several high-value but very niche
applications for synthetic graphite, with small quantities sold
by companies such as US-based Asbury Carbons and Superior
Graphite, and French company Imerys’ Graphite
& Carbon division in Switzerland.
Synthetic versus natural graphite
Synthetic graphite competes with natural graphite in the
battery anode market and in some speciality applications.
Consistency issues are the main barrier to wider acceptance
of natural graphite in batteries.
Natural graphite can never be made "perfect" because it will
always have irremovable impurities, but it can make up for this
through other properties.
Many synthetic graphite and anode producers have very close
relationships with battery makers, built on years of testing
and working together to develop highly customized anode
This means that there is very little "like-for-like" or
standardized material in the synthetic graphite market, and
most anode material is bespoke to a certain extent.
Synthetic graphite is by far the leading material globally
for batteries in general. For lithium-ion batteries
specifically, on the anode side, there is roughly a 50:50
market split between natural and synthetic graphite.
It is difficult to see what will change in this respect over
the next five years, because supply chains and battery
chemistries are embedded into manufacturing processes and some
long-term supply agreements, especially with electric vehicle
But every year the slate is wiped clean, and both synthetic and
natural graphite producers have a chance to acquire more market
share, if they can demonstrate advantages over
competitors’ materials or if external trading
conditions convince suppliers or buyers to change their
Synthetic graphite for battery anodes must meet very
specific criteria (see sidebar: "Main specifications of traded
synthetic graphite"), and so too must material for UHP graphite
electrodes used in high-frequency electric-arc furnaces (EAFs),
run by the most high-tech steelmakers.
Most battery anode producers have very tight relationships
each with a specific synthetic graphite supplier.
UHP electrodes also have very detailed specifications, but
unlike the situation for battery chemistries, a select handful
of different suppliers could produce the same product for an
Small-diameter electrodes and secondary synthetic graphite
is more commoditized, and there are fewer criteria for the
material’s structure, although it still must meet
certain minimum levels of carbon purity.
Most synthetic graphite powders offered for sale on internet
trading sites such as Alibaba are not UHP, and are therefore
not suitable for anodes. These products are mostly low-grade
carbon powder, often made from crushed, recycled electrodes
(also known as secondary synthetic graphite).
In the small-volume high-purity powders market, material is
almost exclusively bespoke for niche applications that are
unique to particular customers.
Feedstock for synthetic graphite
Needle coke is the main carbon precursor for synthetic
graphite, although some synthetic producers use other kinds of
There are two main types of needle coke. Petroleum needle
coke is produced at oil refineries by converting by-products of
the refining process (decant or slurry oil, along with
high-quality vacuum residue) into dry, pure, highly crystalline
Coal-based needle coke (sometimes called pitch needle coke,
or just pitch coke) is made from coal tar pitch, a by-product
of coking metallurgical coal used in blast furnace-based
There are around 10 major producers of needle coke globally
and the majority of their output is petroleum-based, from large
Most medium-sized oil refineries do not have delayed cokers
or the complex coking set-up required to produce needle
Only seven significant producers of needle coke operate
outside China, with the largest being Phillips 66 (US- and
UK-based, and accounting for around 20% of global production
capacity). This is followed by Seadrift in the US (which
supplies 100% of its needle coke output to Ohio-based GrafTech
international, accounting for 70% of its annual coke
consumption), while in Japan there are C-Chem, Petrocokes, JXTG
Nippon Oil & Energy and Mitsubishi Chemical.
Global needle coke capacity ex-China has remained broadly
flat for the past 10 years because of the high capital costs,
technical expertise and stringent regulatory requirements
imposed on the development of new projects.
China produces significant quantities of low-grade needle
coke – more than 1 million tpy, according to industry
Despite being a large producer of needle coke, China is also
a net importer, particularly of high-purity material. It has
increased its purchases from foreign suppliers since the
country’s government, in its attempts to reduce
pollution, started to force the closure of needle coke capacity
around two years ago.
Global needle coke capacity was estimated to be about 1.6
million tonnes in 2017.
Updated accurate figures for the sector are difficult to
obtain, but market sources say that plant closures in China,
coupled with some expanded production elsewhere in Asia and
North America, have kept this figure fairly stable over the
past two years, while demand has been rising gradually by 3-5%
Not all anode or speciality synthetic graphite producers use
petroleum needle coke, however, with Hitachi Chemical being one
example. It supplies material to Panasonic, which produces
batteries for Tesla Motors in the US and Nissan in Japan for
their electric vehicles.
Imerys Graphite & Carbon, for example, produces
synthetic graphite for alkaline batteries and other speciality
applications using non-needle coke feedstock, but this section
of the industry accounts for a relatively small share of the
global market – less than 5%.
In the past five years, Asian suppliers have been unable to
keep up with Chinese demand for needle coke, so North American
producers have stepped in to make up the shortfall.
North American needle coke suppliers prioritize (publicly,
at least) their domestic customers over Asian partners. Even
though North American buyers take comparatively small amounts,
local suppliers are willing to guarantee supply for long fixed
periods (more than six months), whereas their agreements with
Chinese customers tend to cover shorter periods.
Between them, Phillips 66, C-Chem, Seadrift, Mitsubishi and
JXTG control around 80% of the 750,000-800,000 tpy of globally
traded high-grade needle coke output.
Global average prices for needle coke have increased from
around $1,400 per tonne in 2016, before the 2017 supply
squeeze, to around $3,500 per tonne in the second quarter of
2019, according to industry sources.
Some in the sector have warned that, although prices seem to
have stabilized so far in 2019, they are unlikely to fall in
the near future. This has prompted synthetic graphite producers
to look for more transparency in their supply chains and to
seek ways to minimize the effects of higher feedstock
All synthetic graphites are initially produced by heating
unstructured carbon (cokes) at temperatures above 2,500°C,
so energy prices are a determining factor in the price of
Oil and (less significantly) coal prices also affect the
price of coke and, consequently, of synthetic graphite.
Prices for synthetic graphite depend on the type of raw
material feedstock that is used (whether petroleum or pitch; if
it is primary material, what quality of coke; if it is
secondary, what other kind of precursor – for example,
electrodes); the kind of heat treatment process that is used;
and the amount and type of pitch binder.
Primary synthetic graphite, produced solely for the purpose
of manufacturing highly consistent graphite powders, tends to
have standardized inputs and processes, such as the Acheson and
In contrast to primary synthetic graphite prices, natural
flake graphite prices have relatively little bearing on the
final price of battery graphite, even for premium large flakes
sold for sphericizing, because the cost of processing and
additional inputs determine the cost of the final product, and
these fluctuate constantly.
Synthetic graphite for battery anodes is mainly traded on a
spot basis in China or on contracts in Japan, which vary in
length depending on who the parties are.
Small-diameter graphite electrodes and some UHP electrodes
are traded on the spot market, but most UHP electrodes are sold
through contracts, because this market is tighter than the
market for small-diameter electrodes and steel mills only have
a handful of preferred suppliers or traders.
For non-anode synthetic graphite ex-China, most sales are
agreed on long-term contracts – for example, GrafTech
enters contracts that are 3-5 years long with a diverse global
customer base, on the basis of take-or-pay at fixed price and
Excluding China, relatively little synthetic material is
traded on the spot market in the primary powders market,
because Western companies prefer to use contracts and most of
their products are more or less bespoke for particular
With needle coke prices expected to remain high in the
medium term, synthetic graphite prices are also expected to
remain at elevated levels for the rest of 2019.
Stricter marine pollution (MarPol) regulations will come
into force in 2020, and will limit the amount of sulfur allowed
in marine fuel to 0.5%, down from 3.5% at the moment. This
could cause further price rises in the synthetic graphite
industry, because it will increase competition for the
low-sulfur crude oil traditionally used in petroleum-based
needle coke production.
New synthetic graphite capacity is being added in China, and
capacities have also been rising in Japan, India, Europe and
Mexico, and this is also likely to generate more demand for
synthetic graphite feedstocks.
China is attempting to tackle tightness in the market by
advancing needle coke production methods using coal tar pitch
instead of oil. But the need to meet strict quality
requirements means that direct substitution of petroleum coke
could be some way in the future.
But even if synthetic graphite prices do rise dramatically,
battery producers point out that the cost of graphite as a
proportion of the overall cost of battery production remains so
small that there is significant headroom to absorb price
increases – and they are prepared to do this in the
interests of maintaining quality, consistency and reliability
So while high prices for synthetic graphite could force some
battery anode makers to reassess their sourcing strategies in
favor of natural material, a major shift is not likely.
Most industry participants think that graphite supply to the
battery market will continue to be split between natural and
synthetic material for the foreseeable future.
Snapshot of the synthetic graphite
While the graphite electrode industry is widely spread
geographically, and has many participants, the anode materials
industry is more concentrated, with most producers based in
There are estimated to be more than 50 battery anode
producers in China.
Major anode manufacturers include Japan’s
Hitachi Chemical, Mitsubishi Chemical, JFE Chemical and Showa
Denko, and China’s BTR, Ningbo Shanshan and
Jiangxi Zichen Tech.
Between them, these companies control around 75% of the
market, although newer and smaller market participants are
starting to capture market share.
These companies import coke, mainly from the US or Japan if
they use petroleum needle coke, and graphitize it in China to
produce 99.99% pure synthetic graphite.
Relatively little synthetic graphite for the anode industry
is sold on the open market in raw powdered form.
In contrast, there are hundreds of graphite electrode
producers globally. Many of these buy needle coke, which they
heat-treat to make synthetic graphite and then shape into
These electrode producers then sell electrodes directly to
customers on a spot or contract basis, or sell to traders in
Electrode dumping by Asian companies has been a major
problem in the US and Europe in the past five years,
contributing to trade tensions with China.