Graphite supply concerns hit the headlines again in 2017 when it became clear that the electric vehicle revolution would have a faster than expected impact on raw materials. Despite their name, the lithium-ion batteries that will power this revolution are heavier consumers of graphite than lithium.
While these high-profile factories are all outside China, Roskill notes that China continues to dominate the lithium-ion battery supply chain and that in 2017 China is still the world's largest producer of:
lithium-ion anode material
Natural/synthetic graphite competition
Lithium-ion battery anodes are an application where natural and synthetic graphite are truly in competition. There will be a continued shift in world graphite markets away from amorphous natural graphite towards flake and synthetic graphite as growing applications require these grades.
Lower prices mean limited funding for new mines
Average prices of flake natural graphite have fallen almost continuously from the sustained peak seen five years ago. At first, prices declined from their artificial high but they have continued to fall in recent years as a result of reduced demand from steel refractories and slower economic growth in China. Although prices are expected to rise in the coming years, with increasing battery demand, companies developing new graphite projects are competing for a limited pool of investment opportunities. Understanding the complexities of the graphite market (including its existing supply chains), finding customers and arranging offtake agreements with those customers, will all prove key to survival.
Flake and vein exploration
New opportunities are arising within the natural graphite industry as companies develop flake resources in Mozambique and other parts of Africa. Around three-quarters of all new capacity (outside China) could be in Africa, where several credible flake graphite projects are being investigated. Other potential new sources are in Australia, Canada, India, Russia and the USA.
Flake graphite developments
Growth in flake demand has previously been driven by refractories but rapid growth of 16-26%py is now expected from the battery market, leading to unprecedented demand over the next decade. High consumption of flake graphite is required to account for the very low yield rates in the processing of flake graphite into spherical graphite, for use in lithium-ion batteries. China may seek even more control in this changing industry. Roskill analysts in China are monitoring this situation on the ground.
Chinese closures and consolidation
In 2016, a new round of nationally-led environmental inspections of Chinese plants led to closures that reduced flake graphite production by around 30%. Consolidation has taken place in the major producing areas and is expected to continue at a low level. Leading manufacturer of lithium-ion anode material, BTR New Energy, is looking to acquire further sources of flake/spherical graphite supply. China previously carried out a dramatic program of consolidation in the amorphous graphite industry which is now almost entirely under the control of one state-owned company. China is still the world's largest producer of natural graphite, both flake and amorphous, representing more than 70% of total global supply.
Supply chain security
China will continue to lead graphite trade and pricing. In the long term, Chinese export prices are expected to rise because of a reduction in Chinese overproduction, as battery demand grows, coupled with further plant closures as a result of tightening environmental restrictions. There will also be an underlying increase in the cost of domestic production (as labour, environmental and overhead costs rise). Meanwhile, the quantity of graphite available for export could decrease as China ramps-up production and export of value added products.
Synthetic graphitesupplies plentiful
Synthetic graphite production is increasing for use in specialist applications. The largest tonnages currently come from the graphite electrode manufacturers, but demand for lithium-ion anode powders could exceed even that from electrodes by the end of the next decade. Barriers to entry in the synthetic graphite industry are high.
Synthetic graphite price falls are making synthetic graphite a more attractive alternative for some new battery customers. There is also an increasing amount of low-cost secondary synthetic graphite available to the Chinese battery industry as electrode manufacturers move capacity to China and other Asian countries, at the same time as closing capacity in the rest of the world. An understanding of petroleum needle coke and synthetic graphite pricing is key to the evaluation of synthetic graphite's prospects in lithium-ion battery anodes.
Notes for editors:
Roskill Information Services has published ten editions of its multi-client report on the global graphite industry over the last 40 years. The tenth edition, Natural and Synthetic Graphite: Market Outlook to 2026 has just been published. We have also published seven editions of our multi-client report on the petroleum coke industry; this report informs our forecasts on synthetic graphite trends.
Roskill is the only consulting company in the world that has up to date information and price forecasts available for petroleum needle coke, synthetic graphite, natural graphite, synthetic graphite end-uses, lithium-ion batteries, refractories, electrodes and steel under one roof.
Roskill will soon be publishing its new Natural & Synthetic Graphite: GlobalIndustry, Markets & Outlook, withforecasts out to 2026. It is essential reading for anyone requiring a comprehensive overview of this sector. Clickhere for further information or to download the brochure.