The two new prices are:
- Flake, +100 mesh, 94-95% C, DDP China
- Flake, -100 mesh, 94-95% C, DDP China
For a generation, China has been the leading force in the flake graphite market; the largest producer and consumer, as well as the biggest supplier to international markets.
As recently as 2016, China accounted for over 80% of global flake graphite production, leveraging a wealth of resources to take the position of price setter in the global market.
The material which was not produced in China, was often priced against comparable offers from the rest of the world and when contract negotiations took place, the China price was always at the forefront of discussion.
Whether the market was moving up or down, China was (and still is) the leading indicator.
From the finer flake grades produced in vast quantities in the country’s north, to the larger flake distribution found in the mines of Shandong and Inner Mongolia, China dominates across the graphite spectrum.
As a result, it is pricing out of China (on an FOB basis) that has formed the foundation of Benchmark Minerals’ monthly assessments to date.
However, with the graphite market entering a period of change that will see China’s supply position challenged and a new high-tech driver of growth emerge, far removed from the industrial foundation of the industry, Benchmark Minerals has chosen to expand the prices it publishes in line with changes in the market.
A SHIFTING LANDSCAPEThe biggest development in flake graphite supply has come about through the emergence of a number of new flake graphite operations in Africa since the early 2010s, with the continent vying with China as a source of low-cost material.
Leading this charge has been Syrah Resources which produced 100,000 tonnes of flake concentrate in its first full year of production alone, the equivalent of 11% of global supply in 2018 and making the company the largest single producer in the world.
The company’s goal to displace higher-cost and less-efficient operations in China has seen major volumes imported into China for the first time in a generation, and in 2019 – supported by growing domestic consumption – the country became a net importer for the first time in a generation.
Where the price out of China was the market’s leading indicator, now the price into China is having a more substantial bearing on international markets.
The differential between China’s domestic pricing and China’s export pricing is important for two key reasons.
Firstly, with China as the leading consumer of graphite – particularly for finer mesh grades – new suppliers outside of China will increasingly have to compete with what domestic suppliers can offer.
Secondly, and most importantly, China controls the supply chain into lithium-ion batteries, and while at one time much of this supply chain was internalised, the market for battery feedstocks is becoming increasingly liquid in China.
GRAPHITE’S NUANCESIn any price assessment of the flake graphite industry, it is important to understand that it is not just one market, but rather up to 10 different markets each with their own sub-segments, demand profiles, and product specifications.
No graphite deposit allows you to supply just one of these markets, so producers have to be able to sell into a cross-section of end markets.
The industrial foundations of flake graphite demand require a spectrum of flake sizes and purities but historically higher purity and larger flake has equalled higher prices.
The future growth of the market is however coming from non-industrial applications.
Value-added applications have risen from small, niche parts of the industry to major drivers of demand, using flake feedstocks to produce higher-value derivatives.
Nowhere is this more the case than in the spherical graphite market where flake concentrates are used to produce a battery anode feedstock material which is due for over 10-fold growth over the coming decade.
While this application is not new, until recently supply was controlled by a small group of suppliers that owned (or had stakes in) resources directly, so flake feedstocks were not commonly traded.
The evolution in the market over the past 1-2 years has been a rapid expansion in the number of processors in the battery anode supply chain, and the layers that support this industry.
Today, in addition to flake concentrate processors, there are companies that have established independent spherical graphite mills, purification plants, and coating furnaces – all crucial steps in taking flake graphite from a mined product to advanced anode material.
And at the centre of each of these supply chains is China, heading up an increasingly liquid and important sector at the heart of global battery ambitions.
