Synthetic graphite electrode prices rose nine-fold through the first three quarters of 2017, increasing from US$1,748/t in January 2017 to a high of US$16,309/t in September, according to Roskill Information Services. Despite some fallback during the winter months, prices remained above US$15,600/t through February and March 2018. Spot prices were reported at up to US$35,000/t through late 2017, although most material is typically sold on a contract basis.
Producers of crude steel, stainless steel and ferroalloys have all introduced electrode surcharges to pass on some of the rising costs to their customers. Outokumpu reported in its interim report for Q1 2018 that high graphite electrode costs were still having a negative impact on steelmaking profits in Europe. Consumers have been reluctant to pay the rapidly rising costs and drew down on graphite electrode stockpiles for as long as they could. The tight supply/demand situation for graphite electrodes is expected to persist for much longer than many market observers expect.
Price rises are the result of a perfect storm of conditions in China, Roskill said. First, environmental plant closures in the raw material coal needle coke industry hampered the production of graphite electrodes. At the same time, consumption of graphite electrodes in electric arc furnaces (EAFs) began to rise as the Chinese government took steps to halt production of poor quality induction furnace steel. Scrap steel was banned from sale to such furnaces in early 2017, becoming available for use in EAFs. Meanwhile, needle coke is being increasingly diverted into the battery market.
Batteries underpin growth in natural graphite. Synthetic graphite accounts for more than 60% of the world’s graphite consumption, with natural graphite accounting for the remainder. Both synthetic and natural graphite compete for use in lithium-ion battery anodes, along with an increasing amount of needle coke and other existing carbon materials.
Natural graphite often provides a low-cost option, despite the extensive processing needed to transform mined product into the high carbon, low impurity, technical grades required for lithium-ion batteries. Natural flake graphite has to first be purified with high temperatures and strong acids and sphericalized into the intermediate product spherical graphite for use as an anode material—a process which is currently carried out only in China.
Demand for graphite in battery applications is forecast to grow by 5-8% per year over the decade between 2017 and 2027, depending on the uptake of electric vehicles (EVs) and energy storage—the largest end-use applications for lithium-ion batteries. Roskill forecasts that global sales of EVs and hybrid vehicles will increase rapidly in the coming years and could account for 69% of all motor vehicle sales by 2027.
Rising flake graphite prices spur new development outside of China. The growing demand for spherical graphite has injected life into natural graphite supply chain development in the rest-of-world (ROW). Projects that had been quiet for a number of years during a time of price stagnation have begun to raise capital and progress projects supported by rising flake graphite prices through late 2017 and early 2018.
By February 2018, flake graphite prices had increased by up to 50% since September 2017, and around 20 projects outside of China have now been developed to feasibility study or beyond. The focus for developers is now to produce the highest ratio of fine to medium-size flake, most-suited for spherical graphite.
Developers can supply their larger flake sizes to refractories, which remain the largest market for flake graphite by tonnage, but one which is growing slowly thanks to China’s weak crude steel growth rate. Extra-large ‘jumbo’ flake sizes are increasingly sought after for use in the smaller, but rapidly growing, market of expandable/expanded graphite, used in flexible graphite products and fire-retardant materials.
ROW still far from developing a spherical graphite supply chain. Syrah Resources jump-started the ROW graphite supply chain when it brought its Balama flake graphite project online in November 2017. The project, situated in the Cabo Delgado province of northern Mozambique, some 200 km (124 miles) west of the port town of Pemba, has the potential to become the largest in the world with plans to increase capacity to 350 ktpy in the future (around 60% of current global flake production).
Near-term targets are still substantial at 160-180 ktpy of production in 2018 and 250-300 ktpy in 2019, although it is still too early to tell if the 2018 target will be achieved following minor setbacks to processing ramp-up early in the year, Roskill said.
The focus for new natural graphite development remains in Africa, where almost 1 Mtpy of additional concentrate capacity has the potential to come online by 2027 with projects in Madagascar, Malawi, Mozambique, Namibia, and Tanzania. Other projects are also planned in Austria, Canada, India, Russia and the US.
A major theme in recent years has been the attempt to establish a spherical graphite supply chain outside of China. Barriers to entry are high, including the need to develop alternative processing methods with a lower environmental impact than those used in China.
Syrah Resources’ plans for a spherical graphite production plant in Louisiana were disrupted in early 2018 when the governing authority of the proposed port location determined the plant not to be a suitable fit for the site. Syrah has a binding sales agreement with Jixi BTR Graphite Industrial (a subsidiary of China’s BTR—the largest producer of anode materials in the world) to supply 30 kt of graphite during the first year of production, which will be processed into spherical graphite in China.
China remains the center of the graphite industry. China continues to dominate graphite production and demand, Roskill said. Almost all stages of the lithium-ion battery manufacturing chain are focussed on China and China is by far the largest and most rapidly growing market for lithium-ion batteries.
In the electrode industry, China is on the brink of a rapid shift to EAF steel production. Just 6% of China’s steel is currently produced in EAF, far below the global average of 25%. As high quality steel products reach the end of their lives in China and other Asian countries, the increasing availability of scrap steel will combine with China’s plans to reduce its environmental footprint and drive a shift to EAF. It is likely that China will be able to meet its own steel demand with domestic scrap within a few years, Roskill said.
In 2017, the closure of induction furnaces resulted in large amounts of scrap steel flooding the market, although much of this is believed to be low quality. Chinese exports of scrap steel increased from around 1,000 t in 2016 to 2.2 Mt in 2017. The Chinese government is unlikely to allow high exports to continue, however, and exports of steel scrap are now being discouraged with a 40% duty.
Roskill’s Natural and Synthetic Graphite: Global Industry, Markets and Outlook to 2027 report will be published in May 2018 and details natural and synthetic production, consumption and market trends.