Graphite India was forced to halt production at its Bengaluru plant in Bangalore in February, as the result of a court ruling by the National Green Tribunal following concerns over pollution. The Company’s Board of Directors passed a resolution for the permanent closure of this plant in the first week of April 2019. Almost two months later, at the end of May, residents are claiming pollution levels in the local vicinity of the plant to have fallen, although this has not been proven conclusively by the state Pollution Control Board (PCB).
The PCB calculates an air quality index (AQI) by recording monthly averages for five major pollutants—PM10, PM2.5, SO2, NO2 and NH3—across multiple locations. The AQI ranged from 87 to 125 between August 2018 and February, when the plant was in operation and 98 in March following the plant’s closure (a figure lower than most values reported in previous months).
Graphite India is a major manufacturer of synthetic graphite electrodes and operates three plants in India (including the Bangalore plant) with a total capacity of 80ktpy, as well as a plant in Germany with 18ktpy of capacity.
The graphite industry has come under major scrutiny in recent years because of its relatively high pollution levels, especially those involved with the processing of natural flake graphite into spherical graphite (a product used almost exclusively in lithium-ion batteries) and the manufacture of synthetic graphite from needle coke raw material. Supply has been constrained for both natural and synthetic graphite in recent years as the major producer, China, has sought to improve the environmental impact of its graphite industry. Prices for synthetic graphite electrodes increased by more than 800% between January and October 2017 and remain inflated by 2-3 times as of April 2019. Prices for natural flake graphite increased by an average of 45% between September 2017 and February 2018, and still average 15% higher despite several rounds of downwards price readjustment. So far, pollution controls have been focused mainly on the Chinese industry, but Graphite India’s closure suggests that controls in other regions may also have an increasing impact on global supply going forward.
The Chinese government continues to see environmental improvements as a major priority and is expected to continue its programme of plant inspections through 2019, enforcing closures until plants meet rising pollution targets. China’s Ministry of Environmental Protection has recently stated that ‘EIA system, as an important part of environmental protection management, would only be strengthened with the deepening of the reform and would not be weakened’. Roskill’s research in China suggests that the government disagrees with the view that environmental protection erodes economic development. In fact, a large number of Chinese producers are now reporting higher profits, especially the loss-making SOEs.
For natural flake graphite, there were four major rounds of inspections between 2016 and 2017, followed by two ‘look back’ rounds in June and October 2018 to check progress, focussed mainly on Heilongjiang and Shandong – the centres for flake and spherical graphite production. In 2016, Chinese flake graphite production fell back by as much as a third, and supply growth has continued to be constrained in more recent years by on-going closures.
Synthetic graphite production, meanwhile, has been affected by shortages in the supply of coal-based needle coke. Combined with rising demand from the battery industry and from the steel industry (as China shifts to greater electric arc furnace production), the synthetic graphite market could continue to see shortages in the coming years. As of 2020, stricter marine pollution (MARPOL) regulations could also further impact the availability of petroleum-based needle coke for synthetic graphite production.
Roskill’s NEW Natural & Synthetic Graphite: Outlook to 2028 report will be published in June 2019 and discuss the implications of these environmental closures as well as new sources of supply that could to come on-line over the next ten years. Click here to download the brochure and sample pages or to access further information.