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Refractory grade graphite: Seeking Chinese supply diversification

Date post:08-Sep-2014
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A look at the supply situation natural flake graphite used in refractories. Also discussed is: China's role, prices, 5 points for the future.
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  • Refractory-grade graphite in 2013 Simon Moores, UNITECR 2013, Victoria, Canada Simon Moores, Manager, Industrial Minerals Data Connect [email protected] www.indmin.com/GraphiteAnalysis
  • 1. The situation 2. Production 3. China 4. Exploration boom 5. Prices 6. The future Simon Moores, Manager, Industrial Minerals Data Connect [email protected]
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] 1. The situation The world has become over-reliant on good quality, low cost flake graphite from China Some major refractory producers are seeking supply diversification, reduce dependence on China No new mines outside China since the 1980s New raw material competition on horizon Steady supply from China being threatened Long term, stable prices have not existed for 5 years
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Where is natural flake graphite mined?
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Where is natural flake graphite consumed? 2012 Refractories, foundries and crucibles - 39% Batteries - 9% Metallurgy - 28% Lubricants - 9% Part & components - 10% Other - 5%
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #1 China Shandong, China Dominates all forms of natural graphite production Flake, amorphous and spherical 61% of worlds flake graphite in 2012 89% of worlds amorphous graphite in 2012 Main producing regions for flake Heilongjiang Shandong Inner Mongolia Total flake output in 2012: 450-480,000 tpa No active restrictions on graphite supply Graphite listed as a strategic mineral in China, consolidation under discussion
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #1 China Shandong, China Chinas graphite production rise: Chinas % of global graphite output 1973 - 15% 1983 - 33% 1993 - 50% 2003 - 84% 2013 - 78%
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #2 Brazil 23% of worlds flake graphite output Nacional de Grafite (right) worlds largest non- Chinese producer by far Supplier of large and medium flake Has been operating at capacity for the last 3 years Expensive for Brazilian producers to export, domestic focus (25:75) 1 new graphite mine project Minas Gerais, Brazil
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #2 Brazil Offers the most immediate potential for supply increase 2 operating flake producers = total capacity 102,000 tpa 1 mothballed flake graphite mine Strong domestic market and export potential to North America which relies on China and to a lesser extent Canada and Europe 75% of production is domestically consumed at present
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #3 India 7% of worlds flake graphite output Production hugely over estimated for years 140,000 tpa, in reality 25-30,000 tpa Industry very fragmented No mines larger than 7,000 tpa Questions over how much flake is mined in India versus how much imported from China and reprocessed Jarkhand, India
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #3 India Consolidation needed to be a major global graphite exporter No exports strong internal demand Imports from China Poor infrastructure major barrier to development
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #4 Canada 3% of worlds flake graphite output 2 operating mines, 1 major mine in Quebec = Lac des Illes 15,000 tpa, predominately medium flake graphite Moved to a new mining pit = production good until 2015 Consistent producer to global market for 20+ years Supplies North America and Europe
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #4 Canada Mining suspended in 2013 Slow market conditions, operating from inventory Large flake graphite questions Exploration Post-boom era Serious graphite exploration companies now coming to the fore Canada home to some major global projects Companies present: Syrah Resources (booth), Flinders Resources
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] #5 Norway 2% of flake graphite output Underground mine in Skaland, north Norway Europes only miner No significant expansions are expected in the medium term Skaland, Norway
  • Resource management Environmental reasons commonly given ButChina no longer wants to be the bread basket for the rest of the world Exports of raw materials at the expense of resources/environment no longer a viable long term business The rare earths excuse The China factor: production and policy Macro changes in China:
  • Pollution controls Blanket ban on all round/downdraft kilns, Shanxi Heavily polluting, inefficient Had to covert rotary kilns or go bust 75% of producers wiped out overnight Prices up 70% 2007 Refractory-grade bauxite 2009 Flake Graphite, Inner Mongolia 2011 Amorphous Graphite, Hunan Mine closures of older operations Pollution and demand grounds Government-forced consolidation in Lutang Coal and amorphous graphite industries 220 mines to 30 on pollution and resource protection grounds 2012 Flake Graphite, Jixi, Heilongjiang
  • Developing a value-added economy Exports of raw materials at the expense of resources/environment no longer viable Development of the production value-chain is critical The 7 key industries China wants to develop 1. New energy 2. New energy automotive 3. New materials 4. Energy saving and environmental protection 5. Biological science 6. New information industry 7. High-end equipment manufacturing
  • 2. Macro changes to mining in China High quality, lower cost manufacturing Consolidation majority of production by the fewest companies China wants to compete on quality and quantity Output of top ten steel producers - % of total capacity
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] The China factor: production and policy Graphite compared to other raw materials The Kooroshy Commodity Chart Source: Resources Futures, Chatham House, London
  • Exports to imports for raw materials 2000 average import dependency: 15% 2011 average import dependency: 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% Bauxite Copper Iron ore Coking coal Average 2000 2011 Chinas dependency on imported raw materials Note: China is a net exporter of natural graphite
  • The medium term future for China In need of modernisation Increased focus on more efficient graphite mining Consolidation in flake will happen = when? High potential for export supply restrictions in favour of value-added products Net exporter of graphite for foreseeable future China is industry leading with commercial spherical graphite China will compete in other advanced battery materials
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Exploration boom
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Exploration boom 2010: 5 exploration companies 2011: 60 exploration companies 2012: 125 listed graphite exploration companies* *Tech Metals Research Graphite Production & Exploration Map: Free at UNITECR 2013
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Prices Volatility in commodity markets Source: Resources Futures, Chatham House, London
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Prices
  • Simon Moores, Manager, Industrial Minerals Data Connect [email protected] Prices 2009-2013 the era of volatility 2009 2010 2011 2012 2013 Producers take capacity off-line in response to global economic crisis Destocking cycle ensues Markets rebound stronger than anticipated Suppliers cannot react quick enough, not enough inventory to satisfy demand Supply shortage Price spike Flake graphite price reaches all time highs +80 mesh, 94-97% C, CIF, Europe = $2,500/tonne Situation + graphites green energy uses + no viable substitutes = boom in new exploration H2 2012: Demand begins to slow H1 2013: Prices plummet as demand stagnates China significantly struggles for the first time
  • Simon Moores, Manager, Industri
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