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Greater commoditization of the graphite market was required in Europe in order to attract investment that would allow the market to develop and overcome supply deficits, according to speakers on the “Graphite: Are we heading from oversupply to undersupply?” panel on Tuesday September 20.
“Commoditization is absolutely essential for this industry. If it does not happen, we will continue to be a niche participant, and we will remain unable to raise the capital we need to build these mines,” Hugues Jacquemin, chief executive officer of graphite producer Northern Graphite, said.
Production of graphite flake and downstream derivatives must ramp-up in order to meet the expected demand from the gigafactories that will emerge across Europe and elsewhere, they said.
“Sometimes [what is needed is] $1 billion to build a mine and an anode manufacturing facility that would allow you to produce 40,000 tonnes of anode material, which will be just sufficient to supply one gigafactory,” Jacquemin said, “and there’s 21 of them coming.”
The alternative to a widely accepted standardized approach to new upstream projects would be individual initiatives that had to market themselves on their own terms.
But such a case-by-case approach would be a disincentive to investors, according to Kevin Smith, managing director of trading and marketing company Traxys.
“Getting investors to invest in discrete independent projects is a harder sell,” he said. “If you say there is some standardization, then it is an easier sell because you can justify it with supply and demand imbalances across a broader market.”
This process of commoditization has already begun upstream but must continue for more processed material too, according to Smith.
“I think commoditization has arrived at the flake level,” he said. “I think you could argue that it has arrived at the SPG [spherical] level, and is maybe heading toward it at the CSPG [coated spherical] level. It may be not quite there yet, but you can see the trend happening in the standardization there.”
Ultimately, the sector should be working toward developing an index that would be widely accepted, according to Smith.
“We are getting the ingredients you need to allow an index price to exist, to be representative of the commoditized, standardized product that a lot of the market is using,” he said.
But further clarity and standardization were required to encourage investment, and for the market to develop, Jacquemin said.
“It has got to start at the raw material,” he said.
“What is the flake size? That’s the basis – and then you can move down the supply chain and say what is the yield that we can expect from the flakes when we make the anode material. What kind of purity should we be expecting? What kind of coating should we be expecting? And what is the cost of that?” he said.
“We need to be more transparent across the chain so that investors [and] stakeholders can have a level of comfort about what it is that we are going after,” he added.
In addition to standardization, Jacquemin called for increased transparency in pricing.
And price transparency has already increased downstream with new active anode material beginning to be made outside China, according to David Christensen, managing director of graphite producer Renascor.
Fastmarkets has price assessments for the flake feedstock to make anode material to the specification of graphite flake 94% C, -100 mesh.
The most recent price assessments for graphite flake, 94% C, -100 mesh, cif Europe, and graphite flake, 94% C, -100 mesh, fob China, were $800 and $810 per tonne respectively on September 22.
This flake material is processed to produce uncoated spherical graphite.
Fastmarkets currently only assesses this market on an fob China basis because the market is still developing in other parts of the world.
Its price assessment for graphite, spherical, 99.95% C, 15 microns, fob China, was $3,100-3,300 per tonne on September 22.
But the market has not yet consolidated around a long-term agreed structure for coated spherical graphite, which is the active anode material used in batteries.
“The anode makers are quite risk-averse,” Renascor’s Christensen said, “and they don’t want to commit to that [in the] long term, so they demand flexibility from producers such as us, so they can change it [in future].”