Anode producers are increasing their use of synthetic graphite and slower trade flows resulting from China’s export controls on certain natural graphite products are causing concern, according to delegates at the ICCSINO anode event held in Yangzhou city in eastern China, on March 27-28.
Graphite anodes currently remain the main anode material for lithium-ion batteries, with synthetic material accounting for around 90% and the natural graphite 10% in 2023, according to sources.
While both the synthetic and natural graphite market experienced downward pressure due to slow demand last year, market participants at the event said natural graphite was more affected due to more anode producers shifting to the synthetic material on lower costs and better performance.
And China’s imposition of export controls on certain graphite-related products last December, has led to a decline in flake graphite and spherical graphite exports.
Prices plummeted through 2023 and Fastmarkets’ price assessment for graphite flake 94% C, -100 mesh, fob China dropped by 33.43% to $530-575 per tonne on December 28, 2023 from January 5, 2023 at $830 per tonne.
And apart from an uptick at the start of January, that downward pressure has continued in the first three months of 2024, with the price falling to $470-510 on March 14 and remaining there ever since.
Fastmarkets’ price assessment for graphite spherical 99.95% C, 15 microns, fob China fell $500-700 per tonne, or 20.75%, to $2,000-2,100 per tonne on December 28, down from $2,500-2,800 per tonne at the start of the year on January 5, 2023. Since the start of 2024, it has continued fall and was down by $100 per tonne, or 2.44%, to $1,800-2,200 per tonne on March 28, having started the year at $1,900-2,200 per tonne on January 4.
Compared with the natural anode precursor, which requires further coating before it can be used in anodes, the price for low-end synthetic anode materials stood at 15,000-20,000 yuan ($2,073-$2,764) per tonne, an anode producer source told Fastmarkets on the sidelines of the event.
“Natural graphite anodes used to have the advantage of lower costs to offset the disadvantages, such as poor compatibility with electrolytes, poor cycling stability, faster decay, and battery swelling. But the cost-effectiveness of the natural graphite anodes for some low-end lithium-ion batteries is gradually decreasing with plunging, alongside tumbling synthetic anode prices,” the source added.
And the recent downward movement in graphite prices and improved operational rates among anode producers mirrored the trend to use less natural graphite in the new energy sector, according to a graphite flake producer.
A second producer source told Fastmarkets: “Orders for anodes increased on a monthly basis in March, resulting in a rebound in anode production, with the top producers said to [be operating at] a production rate of more than 80%, while some small- and medium-sized ones were operating at around 50% or lower.”
Oversupplied natural graphite market
Increasing supplies of flake graphite over the past year could be another driver behind the overall bearishness in the natural graphite market – aside from the pressures imposed by the rise of synthetic graphite, market participants said.
“China’s total flake graphite capacity was up by 0.6 million tonnes to 1.8 million tonnes in 2023, with Heilongjiang province accounting for 92% of that total,” a second speaker at the event said.
The spherical graphite market, meanwhile, was in decline through 2023 and “will continue to operate weakly due to slower downstream demand,” according to a spherical graphite producer source in China.
“Spot market inquiries are falling and there have been only a few new orders for spherical graphite, with some producers even selling on their existing inventories,” the source said.
As far as the capacity for spherical graphite is concerned, total production capacity in China reached 0.6 million tonnes in 2023, creating an oversupply to what is needed in the market for natural anode precursors, according to a second spherical graphite producer.
Slower export flows from China
The prolonged review cycle for natural graphite export licenses in China is adding further pressure to the natural materials market, with buyers slow to procure and suppliers holding higher inventories, according to one flake graphite producer in China.
“While we can get the licenses eventually, it usually takes more than a month with frequent information flows between sellers and buyers to have the required files prepared,” a graphite trader told Fastmarkets. “The long lead time has resulted in buyer caution about placing orders, [resulting in reduced] liquidity for now.”
Reduced exports means increased supplies for China’s domestic market. So while spherical graphite faces the competition from lower-priced synthetic graphite for anode production, flake graphite used in traditional refractories is also under pressure from the slow recovery in China’s steel market, according to a second trader.
In terms of natural flake graphite, some delegates at the ICCSINO anode event were optimistic about long-term developments, thanks to growing demand for anode materials with a lower carbon footprint.
“As far as the near term is concerned, [natural flake graphite] oversupply will remain the ‘new normal,’ with prices under continuous downward pressure. [But the] market will stabilize and return to the internal value of products,” a second speaker at the event said.
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