Just before the Tanzanian commission's most recent announcement, Matthew Keane, an analyst with Perth, Australia-based corporate advisory Argonaut, issued a client note May 14 declaring that his firm had received "unconfirmed reports" that Chinese government authorities have ordered the immediate shutdown of graphite production in the Shandong province's Qingdao region.
Argonaut understands that the order, issued on an environmental-control basis ahead of the Shanghai Cooperation Organisation Summit in Qingdao in June, was issued via a formal letter to a number of local producers, ordering production to cease from May 10 to Oct. 1.
"Qingdao accounts for the majority of Shandong's graphite production, which, in turn, accounts for 15-20% of China's overall natural flake production," Keane said. "As China accounts for 60% to 70% of global natural flake production, these shutdowns could impact 9% to 14% of global supply and therefore have a positive impact on graphite prices."
"When considered in light of China's broader environmental crackdown, this shutdown may foreshadow a sustained period of supply disruption in China. Such a scenario is considered to be highly supportive for flake graphite pricing and international producers and developers," he said.
While confident in Keane's sources, Spinks said the outlook for additional pricing increases was looking up, considering not only the environmental closures of graphite mines but also the ban in some provinces over the use of hydrofluoric acid, which is "putting [a] squeeze on supply."
"The combined events put us in a very favorable position, given we've developed a proprietary eco-friendly purification method that doesn't use hydrofluoric acid, but most importantly is cost-effective with existing supplies," Spinks said.
"Last year, we witnessed a major turn in the demand for graphite, which was [a] reaction to the Chinese government declaring all-electric vehicles by 2030, so the Chinese battery manufacturers have had to react, which created the price spike in other battery minerals," he said. "[We] didn't see a price spike instantly with graphite; however, we've seen prices for some grades double from their 2017 lows, including battery grade graphite —the standard Chinese grade —by 40%. By 2020 in northeast Asia, demand for battery graphite is [expected to be] 300% to400% higher."
Keane also told S&P Global Market Intelligence that while prices are opaque, the news out of Shangdong, if true, is positive for graphite hopefuls and even existing players.
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