The EU has released an updated list of critical raw materials, adding bauxite, titanium, lithium, and strontium, while removing helium. Natural graphite remains on the list, which identifies materials with a high risk of supply shortage whose impacts on the economy are higher compared with most other raw materials. The supply of many of these commodities is dominated by just one country, in the case of natural graphite, that country is China. However, China’s dominance in natural graphite is under threat.
Roskill’s new report on the graphite industry identifies China as the source of more than 90% of world supply of amorphous graphite, and around two thirds of flake graphite supply in 2019. Flake graphite is a raw material vital for use in lithium-ion battery anodes and a key mineral for the success of the booming EV sector. Furthermore, 100% of flake graphite processing, which produces lithium-ion battery grades (spherical graphite) takes place in China.
However, for raw material flake, China has rapidly increased its imports, with significant quantities of material now being sourced from Africa. Chinese imports increased by 971% in 2018 to 63kt, and by 212% in 2019 to 197kt.
There are a number of reasons why imports have become increasingly more attractive than domestic production, not least because of rising production (mainly environmental) costs. Economic reserves are also in decline, although China has invested heavily in flake graphite exploration in recent years and new capacity is on the horizon. Companies have looked to foreign sources of particular grades such as extra-large flake sizes (for use in expandable graphite), for which supply in China is limited. Madagascar is a major supplier of large flake sizes; however, a new large-scale mine in Inner Mongolia, currently under development in 2020, may offer a domestic source of these sizes fairly soon.
An administrative focus on downstream domestic production in China has come with tightening restrictions for new enterprises looking to enter upstream supply. Capacity and recovery minimums were set in 2012, and local authorities have since encouraged consolidation and regional integration of the supply chain, bringing in outside companies to take control and withdrawing mining licences. Supply is increasingly controlled by a small number of major enterprises, often with state ownership or investment. Much of the supply is effectively sewn-up by these large players. Add into this the on-going saga of environmental investigations and closures that have plagued the industry in recent years and it is clear why some companies are looking abroad.
For example, one Chinese flake producer, South Sea Petroleum (which mines in Heilongjiang through subsidiary Luobei South Sea Graphite) has reported that its Chinese production lines have only been able to operate for a few months a year because of a graphite shortage, citing limited graphite ore resources and production quotas. In 2016, it entered into a Madagascan joint venture with Madagascar Graphite Limited (MGL), utilising large size flake graphite from MGL’s nearby mine.
Further downstream, a number of non-Chinese graphite producers and project developers are looking to take a slice of the spherical graphite pie, but cost and environmental barriers to entry are high. There are a number of reasons for this, which are explained in detail in Roskill’s new graphite report.
Roskill’s NEW Natural & Synthetic Graphite: Outlook to 2030, 13th Edition report will be published soon and will include analysis of the impact of steel, refractory and EV industry trends on supply, demand, trade and prices, as well as providing forecasts to 2030, profiles of the main producers, and an industry cost curve for spherical graphite. Click here to download the brochure and sample pages for the report, or to access further information.