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The Chinese Pulled the Trigger on the Graphite Crunch
V.GPH | 16 hours ago
VANCOUVER, BC / ACCESSWIRE / February 13, 2015 / Gigafactories, an Energy Storage Boom and China Jumping to Secure More Graphite Tells us the Supply Crunch is On
A sudden move by a state-owned Chinese company shook the graphite market on Tuesday this week, sending the stock price of a medium-cap company up 13% since the news broke. Chinalco (3668.HK) announced an agreement with Australia's Syrah Resources (SYR:AX) for a 3-year contract to supply graphite. Syrah's Balama deposit in Mozambique has yet to go into production, due in 2016 – but 35% of its supply for the first three years in business is already sold. It tells a lot about the supply/demand interaction ahead, and it means large flake graphite deposits are going to be a hot commodity.
China Offline
The Chinese move was surprising. At present, the country is the world's largest producer of natural graphite, accounting for approximately 70% of total supply in 2014. That figure is down from 85% global supply just a year before, and supply is expected to drop to between 50-60% in the next 3-5 years, according to a report by Benchmark Mineral Intelligence. That's a sharp drop of an increasingly valuable mineral on the cusp of booming demand, in less than the time that it takes for a new born to reach elementary school. Supply lines will strain and the price of graphite will reflect that.
"(This)…confirms to us that the world's largest graphite producer is running out of graphite reserves at a time when demand for graphite appears certain to grow strongly. This Chinese customer appears no longer able to rely on Chinese domestic supply, but is seeking large tonnage of supply from outside China."
Canaccord Genuity Mining Analyst, Luke Smith
Part of the Chinese rush to secure more graphite is said to be the rising costs involved in the mining of the graphite at their disposal. The government has been on a crackdown for several years on unsafe mines and is still trying to get to grips with environmental pollution, not a situation to be taken lightly given the notorious smog that clouds major cities like Beijing.
Perhaps few stakeholders will be sad to see the Chinese stranglehold on world graphite supply diminish, as repeated, sudden mine closures over the past few years knocked significant supply lines offline on a whim. Manufacturers prefer more stable and diverse supply.
Electrifying Demand


full story here - http://www.stockhouse.com/news/pres...ese-pulled-the-trigger-on-the-graphite-crunch