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https://source.benchmarkminerals.com/article/growing-demand-for-ex-china-graphite-drives-need-for-new-pricing-data?

Benchmark launches CIF North America graphite price driven by growing demand for ex-China graphite

Downstream market players are accelerating plans to diversify their raw material supply away from China, pushing the supply chain to require new prices which reflect trends in the ex-China market.

In the graphite market, incentive policies such as the Inflation Reduction Act (IRA) and the recently enforced Chinese export regulations have encouraged this trend. In 2023, China produced about 70% of global supplies of natural flake graphite and almost all the spherical graphite used in anodes for lithium ion batteries.

“Downstream players are looking to geographically diversify their sourced material away from China, seeking government incentives under the IRA, and benefits from localisation such as greater security of supply, reduced shipping times, and emissions,” said Tony Alderson, graphite analyst at Benchmark.

China’s graphite export regulations, which came into effect on December 1, 2023, have had minimal impact on prices, but they have catalysed the trend of derisking.

“Whilst the regulations implementation and subsequent supply chain disruptions haven’t significantly impacted material prices, they have undoubtedly heightened the battery supply chain’s concerns over China and its dominant position in the graphite market,” Alderson said.

New pricing required in response to ex-China demand

In response to this growing demand for tracking ex-China supply developments, Benchmark now publishes a -100 mesh, 94-95% carbon, CIF North America price. The CIF North American price joins two existing -100 mesh, 94-95% carbon grades, on an FOB China and DDP China basis, which Benchmark assesses using primary data collected directly from active market participants.

The new CIF North America flake graphite grade will be published as part of Benchmark’s Graphite Price Assessment service, giving graphite market players greater opportunity to manage price risk by indexing supply contracts to region-specific trends.

“Increasingly, ex-China graphite players are looking to settle supply contracts against price indexes that are not linked to transactions in the China market, to ensure the price is reflective of dynamics in North America,” said Daisy Jennings-Gray, Head of Prices at Benchmark.

“In the US and Canada, we are seeing anode capacity and graphite mining operations being rapidly established, and these market participants want to see the development of regional prices to help deliver transparency in what is still quite an opaque market,” she added.

North America is an important region for the lithium ion battery supply chain. As well as the IRA, the US’ Bipartisan Infrastructure Law allocates $369 billion in public funding for energy and climate-related projects over the next 10 years. Along with other factors, such funding means the US is attracting more cleantech investment than other regions, and therefore more demand for relevant pricing.

“China is also expected to account for over 85% of the global anode capacity market share by the end of the decade, underlining the further investments required outside of China to foster competitiveness and challenge its market leadership,” said Alderson.

The flake graphite market is expected to enter a deficit in 2025, followed by a surplus between 2026 and 2028, and then a persistent deficit from 2029, according to Benchmark’s Natural Graphite Forecast. Longer-term, the deficit is expected to intensify from about 400,000 tonnes in 2030 to around 5 million tonnes in 2040.

Chinese export regulations

Last year, China’s Ministry of Commerce and General Administration of Customs announced it would require companies to apply for licences to export graphite products, starting on 1 December 2023. Specifically, licences will be required to export:

• High purity, high strength, high density synthetic graphite and ‘its products’
• Flake graphite and ‘its products’, including spherical graphite and expanded graphite.

The restrictions have had a limited impact on graphite prices so far. Licences to allow South Korean buyers to export graphite material from China have already been granted. This could help ensure a stable supply for companies further down the battery supply chain in the country, such as cell makers LGES and SDI.

However, the policy could make it more difficult for overseas companies to buy Chinese graphite, depending on how stringently they restrict permits and for how long. Reportedly, licences for exporting to the US, India, and Japan are yet to be approved. Benchmark expects these licences to be permitted by the end of February at the earliest.