Amorphous graphite price spread widens

By Davide Ghilotti, Sybil Pan
Published: Wednesday, 15 September 2021

China’s amorphous graphite price has widened downward over the past month on mixed market sentiment brought about by slow downstream demand in China but stronger demand in seaborne markets.

 The impacts of power shortages in China on steel production

Fastmarkets’ latest monthly price assessment for graphite, amorphous, 80% C, -200 mesh, fob China, was $380-430 per tonne on August 19, widening downward by $10 per tonne from the previous assessment in mid-July.

Liquidity was reported at the high end of the range while there was an offer out on the low end, indicating mixed market sentiment. There was a weakening domestic market and stronger international markets, but the latter were subject to disruptions arising from the soaring freight costs outside China to main destinations such as Europe and the United States, as well as pre-existing availability issues.

"Demand is declining with [electric] power restrictions imposed on steel mills in most regions of China," one trader of amorphous graphite in the country said. "Meanwhile, the soaring freight costs in the seaborne market have added more pressure on the current market performance."

Multiple regions in China have been subject to power usage curbs since May due to the unusual limitations on the electricity system this year. Power restrictions resulted in output in Guizhou province being reduced by about 3,300 tonnes per day in July, Fastmarkets heard, with operations being suspended for three to five hours each day as a result of electricity black-outs.

graphite, amorphous, 80% C, -200 mesh, fob China

The power restrictions did not only result in declining steel output at blast furnaces (BFs), but also at electric-arc furnaces (EAFs). Given that amorphous graphite is mostly used as a carbon raiser to strengthen steel in EAF processes, but also in the linings of BFs for iron production because of its high thermal conductivity, the output reduction at steel mills was bound to affect their demand for the material, according to a producer of amorphous graphite in China.

Meanwhile, immediate demand for amorphous graphite has also been slashed due to there being ample inventory among downstream users.

"Steel mills built enough inventory of the material in the first half of this year amid the availability issue affecting amorphous graphite. As a matter of fact, the [volume of] material they sourced [at the time] increased by 3.33%,"a second producer source told Fastmarkets.

Nevertheless, demand was reported to be stronger in destinations outside China. Suppliers serving Europe reported growing demand for amorphous graphite material from several origins, including China and Turkey, with consumers replenishing low stock levels and reporting full order books.

This suggested the possible development of a two-tier market, and could account for liquidity being reported at the top end of the current price range or even higher, sources said.

Availability problems
On the supply side, the availability of amorphous graphite has been a problem since the start of the year, with mining operations interrupted for safety checks and environmental inspections in China. The price of amorphous graphite surged by 37.82% at the mid-point on an fob China basis from the start of the year, when it was $270-325 per tonne, to a year-to-date peak of $390-430 per tonne in the middle of July.

"Inventory is piling up gradually at the moment, due to slowing demand from buyers in China and abroad, when you factor in the global logistics issue," a second trader said.

Freight costs have rocketed since the fourth quarter of last year, and the latest bulk shipment of amorphous graphite on August 19 was said to have cost around 100 yuan ($15) per tonne, while the cost for a full container load (fcl) would have been around $250-300 per tonne from China to Europe, according to sources in Europe.

The current fcl cost, sources said, compared with $45-50 per tonne outside China to Europe under normal circumstances.

Mixed sentiment for small flake graphite market 

Prices for fine flake graphite were stable in the Chinese market during the week to August 12 on low liquidity. But mixed sentiment characterized the fob China market, with global logistics problems and weaker domestic demand for refractories, but a sound spherical graphite sector.

Fastmarkets’ weekly price assessment for graphite flake 94% C, -100 mesh, fob China (-194), was $540 per tonne on August 12, in line with the previous assessment.

Despite this stability, inputs received indicated that market participants disagreed about the near-term outlook when the overseas market comes back from the summer vacation period. This could depend on the global logistics situation, which was adding uncertainty to import shipments, as well as the supply situation in China, making it difficult to say how the market will perform in the near term, according to one graphite trader in China.

The continuing international logistics disruptions have hampered China’s imports of flake graphite. Syrah Resources, one major source of flake graphite outside China, reported that it could not match production and sales from Balama in Mozambique with customer demand, owing to the present challenges of global shipping.

"We have a shipment ordered with Syrah, but it seems that it will not arrive until the end of August, a delay of two months," a spherical graphite producer in China said.

According to Chinese customs data, the country’s imports from Mozambique were around 1,309 tonnes in the first half of 2021. Syrah Resources suspended operations at Balama in 2020 because of the Covid-19 pandemic, but restarted production in March 2021.

Graphite flake 94% C, -100 mesh, fob China (-194)

Adding to the price support that has come from lower import volumes was the low inventory of small flake graphite in China. Some market participants reported a tight balance in the small flake graphite market due to sound demand from the spherical graphite sector.

In addition, international buyers will be back from their summer vacations soon, and downstream users in China will start to restock in September before the winter stoppage season in Heilongjiang province. That will boost market sentiment for a while, according to one supplier outside China.

Despite these positive trends, some market sources tended to think that a weak refractories sector in China and a stable spherical graphite sector might offset any support brought by the supply side.

"Prices of small flake graphite tend to be stable for long-term clients in the spherical [market]," a second spherical graphite producer in China said. "Suppliers might want to push up prices because of increasing costs, while they have to factor-in downstream buyers’ willingness to accept prices."

Given that refractories remain a major downstream application for flake graphite, a weaker steelmaking sector could weigh on the market, according to a producer in China.

"The expected cut in steel production over the second half of the year might weigh on demand for flake graphite," the producer said. "Despite low inventory among downstream refractories producers, it might be difficult to increase the price of flake."