Syrah Resources has adopted a new, flexible approach to the
flake graphite market following a dramatic year in which it
began commercial production from its Balama facility in
Mozambique and produced 137,000 tonnes in the first nine
The Australian miner then slashed its
target production for the fourth quarter of 2019 to 5,000
tonnes per month.
"Looking at 2020, we plan to be flexible and respond to the
market," Joe Williams, marketing manager at Syrah Resources,
told Fastmarkets on Tuesday November 5. "We are looking for
inventories to reduce and the market to come back into
Over 2019, the combination of softening demand and the
arrival of new material on the market has weakened the prices
for flake graphite.
Fastmarkets assessed the price of graphite flake,
94% C, -100 mesh, cif Europe, at $470 per tonne on November
7, down by 28% from $650 per tonne at the start of the
"In the short term, in combination with other mine
developments, Balama is larger and more productive than the
market can currently absorb sustainably," Williams said.
"Additional supply has created an imbalance and this is why we
remain dynamic to the conditions in the market."
In response to the sharp fall in the price, Syrah plans a
new approach to the market. Production will be in proportion to
demand and will be ramped up once prices have recovered
– and it can be ramped up quickly in response to
changes in the market.
"It does not currently make sense to front-run demand at
unsustainable levels," Williams said. "This is a market in
transition to global integration and we continue to test the
price against plant output and market balance. Ultimately, this
leads to a point where price is higher than production cost for
enough of the cost-curve to be incentivized to produce."
Williams conceded that the company had overestimated how
much the industry would increase in size in 2019. "The market
has not grown as much as we would have liked but the long-term
fundamentals of the market are in place and very strong," he
The company retains its full commitment to the Balama
project, however. "There is no better graphite asset or plant
out there," Williams said.
Despite the decision to scale back production, Syrah remains
committed to the business need to produce on a large scale to
bring down unit costs.
"On a long-term basis, supplying to the lithium-ion
industry, small production volumes don’t make
sense," Williams said. "However, in the short term, we are
making an investment to balance the market."
Demand focused on battery sector
"The battery sector is about half the size of refractories
currently, but growth for batteries is relatively very strong,
especially in the mid-to-long term," Williams said. "We are
optimistic that things are moving ahead in the battery sector
on the ground."
About 260,000 tonnes of graphite will feed the Li-ion NG
battery anode market in 2019, which would be a huge jump from
the figures seen three years ago or more, he added.
Demand has also grown for expandable graphite but at a
slower pace and from a lower base.
But demand in the graphite sector as a whole has been
subdued this year, especially in Europe’s steel
and automotive sectors.
Europe’s steel sector weakened in the second
half of the year and there have been signs of softening in
China. And there are long-term challenges to growth in the
global automotive industry, with sales falling this year.
"The concept of owning an auto runs counter to the megatrend
of urbanization. Fleet growth must come from emerging markets,"
Even China’s electronic vehicle sector, which
has been very strong, has softened recently in response to
changes in the country’s subsidies regime.
Development of spherical sector
Syrah has begun
production of purified spherical graphite from its Battery
Anode Material (BAM) plant in the United States, using flake
"The plant is now up and running. The commercial case for it
is contingent on successful qualification and participation
from the market," Williams said.
The initial project is on a relatively small scale but
represents a development for the spherical graphite market,
which is dependent on production in China.
The current plant represents a stepping stone toward a much
larger plant that the company says could service the demands of
"A large commercial plant is not yet de-risked from a
business perspective, but there is huge commitment behind this
plant, which is the first of its kind in production outside
China," Williams said.
Fastmarkets’ assessment of the price for graphite,
spherical, 99.95% C, 15 microns, fob China, has fallen by
11% since the start of the year to $2,500-2,600 per tonne on
November 7. It was $2,800-2,900 per tonne on January 3.
Syrah is developing its trade relationships before ramping
up production from the plant.
"Establishing a position in the market is critical before
really scaling up," Williams said. "This takes time and is
contingent on the contract type – whether it is new or
established - or partnership."
The company can increase its production once the commercial
relationships are in place, however.
"Scaling up can be done relatively quickly now that the
plant has been established," Williams said. "We would hope to
have commercial product [sales] immediately after qualification
- perhaps in six months’ time but probably
The company views the project as a mid-to-long term
[This article was first published on Friday November 8
and was updated to clarify that the Balama graphite operation
is in Mozambique, not Madagascar as previously