Ann: Prospectus Lodged for Approval of Mauritian Note Issue, page-56

As the graphite industry gathered in Berlin last Tuesday (10th September) for Fastmarkets’ 2019 Graphite Conference, news broke of Syrah Resources’ plans to significantly lower production. The company plans to reduce its output of flake graphite concentrate from more than 15ktpm (per month), to around 5ktpm.Syrah Resources has been no stranger to drama since its start-up in Mozambique at the end of 2017 as it brought on-line the largest flake graphite mine outside of China and planned to quickly become the world leader. In Berlin, there was no love lost among the company’s rivals who saw rapid ramp-up of the Balama project as a direct threat to a healthy graphite market. In 2018, Syrah Resources produced more that 104kt, equivalent to 15% of global flake supply, and planned to more than double its production rate through 2019. It shipped 48kt of flake concentrate shipments in Q1 2019 and 53kt in Q2.Industry members have long been concerned with how such large volumes could flood the market and, indeed, global flake prices have declined steadily since the start of this year. The situation has not been helped by a slowdown in demand from China, as the Chinese government has cut incentives for electric vehicles, which provide the main growth area for flake graphite via the use of graphite-based anode materials in lithium-ion batteries.Many delegates at the Graphite Conference were optimistic that the removal of so much planned production could help to see a new floor to falling prices or even a return to positive price movements over the coming months, a scenario which could be encouraged by recent production cuts in China as a result of the lower price. The re-start of this Chinese production could hinder price recovery in the short-term, however, especially when one notes that China is in a state of overcapacity overall for both flake and spherical graphite supply (spherical graphite being the intermediate product produced from flake for use in lithium-ion batteries).In the longer term, Roskill expects the coming rebound in Chinese electric vehicle sales to re-energise the graphite market. The timing of this depends on Chinese policy and on economic growth that will affect China’s potential purchasers of electric vehicles.In terms of raw material, China has already become a major importer of flake graphite since 2018 and Syrah’s wind-down could make room for other non-Chinese producers to take a slice of the pie. Although there are a number of potential new flake deposits currently under development, the concern now is whether Syrah’s performance will hinder future investment in new projects. Graphite project owners at the Berlin conference were very worried that investors will steer clear of the graphite industry as a whole, instead of focussing on the individual problems associated with Balama.Delegates pointed to Balama’s lower than expected recoveries and price achievement, a high cost of production, and a concentrate ratio too heavily weighted towards fines. Many of these points had been made before, yet the project continued to be funded for ramp-up. For others, the main issue with Syrah has simply been it’s ‘Titanic’ size – not just the impact such large volumes could have on the market but, having come on-line, Balama was seen by some as being just ‘too big to fail’.Roskill’s NEW Natural & Synthetic Graphite: Outlook to 2028 report was published in July 2019. Click here to download the brochure and sample pages or to access further information.Contact the authorThis article was written by Suzanne Shaw.