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The 9.7 billion yuan ($1.3 billion) integrated graphite anode project was announced last year and is being built in two phases. The first phase, with planned capacity of 200,000 tonnes per year, has since started production, while construction of the second 100,000-tonne phase has yet to start.
Yunnan Shanshan believes that the green energy opportunities in Yunnan province provide major advantages to its anode material production amid China’s carbon neutral push and the wider energy transition, a source close to the company said.
Yet the move also comes at a time when the graphite anode market is contending with bearishness arising from slow demand from the new energy vehicle (NEV) market and expanding capacity for synthetic graphite, which, along with natural graphite, constitutes a major market share of the anode industry.
Indeed, China’s graphitization capacity, an important process in synthetic anode production, more than doubled to over 2.3 million tonnes in December 2022 from 1 million tonnes in March 2022, with another 1 million tonnes of graphitization capacity being added in the final quarter of 2022, according to data from Chinese news provider BAIINFO.
This overexpansion, together with slowing demand from the NEV sector, has resulted in tumbling synthetic anode prices since the second half of last year. This in turn has put pressure on the natural graphite market owing to the former’s ability to be used in place of natural graphite.
For instance, Fastmarkets’ weekly price assessment for graphite spherical 99.95% C, 15 microns, fob China stood at $2,000-2,200 per tonne on June 29, stable since the start of June, but down by 40.85% from a year earlier.
Additionally, mid- and low-end synthetic anodes were at discounts of 1,800 yuan ($249) per tonne and 2,700 yuan per tonne respectively to their natural graphite counterparts at the end of June. This compares with the premiums of 6,600 yuan per tonne and 12,800 yuan per tonne held by the former against the latter at the start of the year, according to market sources.
Therefore, while some participants expect the anode market will improve slightly in the second half of 2023 with high inventories slowly being consumed, others think that the oversupply in synthetic anode capacity will offset any demand growth and pressurize the graphite markets, both synthetic and natural, for the rest of the year.
“The oversupply in synthetic anode is bound to affect the expansion of natural graphite share in downstream anode production. Anode producers are only willing to increase the consumption of the natural material when there is a spread wide enough between the two raw materials given the better performance of the synthetic graphite,” a trader of natural graphite in China said.
Some industry participants believe that the added capacity from Yunnan Shanshan will also result in increasingly fierce industry competition in the near term considering the prevailing oversupply.
“[The idea for the project was driven by] high graphitization costs pressurizing producers’ marginal profits between the second half of 2021 and the first half of 2022. However, the start of production at the project adds to the current market weakness amid the slow demand and excess supply,” an anode producer source in China said.
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