BATTERY & SUPPLY CHAIN CONF: Flake graphite price recovery hampered by weak refractory sector; market looks to anode demand

Chinese flake graphite export prices will face headwinds in the near term due to a slowdown in its traditional downstream supply chain and a surge of imported materials, delegates said on the sidelines of an industry conference in Qiandaohu, China, on July 11-12.

In the fourth quarter of 2018 and the first quarter of 2019, Chinese flake graphite producers in production hubs, such as Shandong and Heilongjiang province, halted production due to cold weather which caused production costs and transport fees to rise. The resulting supply tightness supported the Chinese flake graphite price.

But thin inquiries and a lack of buying interest from consumers coming into the second quarter of 2019 have caused purchase volumes to decline, dampening market sentiment and spot prices, market sources told Fastmarkets at the Lithium-ion Battery & Material Supply Chain conference hosted by Shanghai Xinluo Network Technology.

Demand from the traditional downstream consumer – aluminum-magnesium-carbon (al-mg-c) brick used as a refractory material – is falling due to reduced output of al-mg-c brick in China following environmental scrutiny. This drop in demand has put flake graphite prices under downward pressure.

According to data from China’s Association of Refractories, China produced around 260,600 tonnes of magnesium-brick in the first five months of 2019, down by 27.56% from the corresponding period of 2018.

Fastmarkets’ price for graphite flake, 94% C, -100 mesh, fob China was at $570 per tonne on Thursday July 11, following drops in late March and April and after the price hit a year-to-date high of $650 per tonne on March 14.

“Our consumer cut their ordered volumes in late March and earlier April [compared with] that in previous years,” a China-based trader said.

“You’re now seeing prices of flake graphite gradually slow down in the spot market since the beginning of the second quarter,” a second China-based trader said.

Adding to the price weakness is ample supply imported from Africa. This is likely to continue capping flake graphite prices in the short term, market sources said.

According to official but unconfirmed data seen by Fastmarkets, China imported 83,976 tonnes of flake graphite in the first five months of this year, up fourfold from 16,167 tonnes in the corresponding period of last year.

Mozambique accounted for 64,820 tonnes of flake graphite shipments into China, which equated to 77% of total Chinese imports during that period. Meanwhile, Tanzania accounted for 3,902 tonnes of flake graphite shipments, 4.6% of the total five-month imports.

But long-term outlook shines on anode demand
Market participants are now looking to developments in the anode sector to counter traditional demand weakness in the long term.

A growing amount of natural flake graphite is being directed toward production of spherical graphite, which battery makers use in battery anodes. But flake graphite still needs to compete with synthetic graphite for market share, according to market sources.

“African [imports] was part of the reason for the price softening, but the emerging application in the lithium-ion battery sector could potentially bring more of the needed [demand] in the market in the near term,” a second China-based trader said.

The price for natural graphite is cheaper than for synthetic graphite, according to market sources, but this comparison only applies in upstream material terms. In the final product, prices of natural and synthetic graphite are similar, sources added.

“If we compare the prices between needle coke and spherical graphite, the prices difference is not that large,” an analyst told Fastmarkets.

High-grade needle coke, a material used in synthetic graphite to produce the lithium-ion battery anode, is traditionally imported into China. Mainstream prices for needle coke used in the anode sector have been reported at around 18,000-20,000 yuan ($2,618-2,909) per tonne in the domestic market.

Fastmarkets assessed the graphite spherical 99.95% C, 15 microns, fob China price at $2,800-2,900 per tonne on Thursday July 11.

“Therefore, well-applied chemistry is the key factor,” the analyst said, adding that while synthetic graphite has more choice in upstream materials, natural graphite has better theoretical lithium-storage capacity, which means the market share of natural graphite is stable at the moment.