refractory grade graphite: seeking chinese supply diversification
DESCRIPTION
A look at the supply situation natural flake graphite used in refractories. Also discussed is: China's role, prices, 5 points for the future.TRANSCRIPT
Refractory-grade graphite in 2013
Simon Moores, UNITECR 2013, Victoria, Canada
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
www.indmin.com/GraphiteAnalysis
1. The situation
2. Production
3. China
4. Exploration boom
5. Prices
6. The future
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
1. The situation
• The world has become over-reliant on good quality, low cost flake graphite from China
• Some major refractory producers are seeking supply diversification, reduce dependence on China
• No new mines outside China since the 1980s
• New raw material competition on horizon
• Steady supply from China being threatened
• Long term, stable prices have not existed for 5 years
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Where is natural flake graphite mined?
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Where is natural flake graphite consumed?
2012
Refractories, foundries andcrucibles - 39%
Batteries - 9%
Metallurgy - 28%
Lubricants - 9%
Part & components - 10%
Other - 5%
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#1 China
Shandong, China
• Dominates all forms of natural graphite production• Flake, amorphous and spherical • 61% of world’s flake graphite in 2012 • 89% of world’s amorphous graphite in 2012
• Main producing regions for flake• Heilongjiang• Shandong• Inner Mongolia
• Total flake output in 2012: 450-480,000 tpa
• No active restrictions on graphite supply
• Graphite listed as a strategic mineral in China, consolidation under discussion
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#1 China
Shandong, China
China’s graphite production rise:
China’s % of global graphite output
1973 - 15%
1983 - 33%
1993 - 50%
2003 - 84%
2013 - 78%
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#2 Brazil
• 23% of world’s flake graphite output
• Nacional de Grafite (right) – world’s largest non-Chinese producer by far
• Supplier of large and medium flake
• Has been operating at capacity for the last 3 years
• Expensive for Brazilian producers to export,domestic focus (25:75)
• 1 new graphite mine project
Minas Gerais, Brazil
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#2 Brazil
• Offers the most immediate potential for supply increase
• 2 operating flake producers = total capacity 102,000 tpa
• 1 mothballed flake graphite mine
• Strong domestic market and export potential to North America which relies on China and to a lesser extent Canada and Europe
• 75% of production is domestically consumed at present
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#3 India
• 7% of world’s flake graphite output
• Production hugely over estimated for years – 140,000 tpa, in reality 25-30,000 tpa
• Industry very fragmented
• No mines larger than 7,000 tpa
• Questions over how much flake is mined in India versus how much imported from China and reprocessed
Jarkhand, India
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#3 India
• Consolidation needed to be a major global graphite exporter
• No exports – strong internal demand
• Imports from China
• Poor infrastructure major barrier to development
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#4 Canada
• 3% of world’s flake graphite output
• 2 operating mines, 1 major mine in Quebec = Lac des Illes
• 15,000 tpa, predominately medium flake graphite
• Moved to a new mining pit = production good until 2015
• Consistent producer to global market for 20+ years
• Supplies North America and Europe
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#4 Canada
• Mining suspended in 2013
• Slow market conditions, operating from inventory
• Large flake graphite questions
Exploration
• Post-boom era
• Serious graphite exploration companies now coming to the fore
• Canada home to some major global projects
• Companies present: Syrah Resources (booth), Flinders Resources
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
#5 Norway
• 2% of flake graphite output
• Underground mine in Skaland, north Norway
• Europe’s only miner
• No significant expansions are expected in the medium term
Skaland, Norway
Resource management
• Environmental reasons commonly given
• But…China no longer wants to be the bread basket for the rest of the world
• Exports of raw materials at the expense of resources/environment no longer a viable long term business
• The rare earths excuse
The China factor: production and policy
Macro changes in China:
Pollution controls
• Blanket ban on all round/downdraft kilns, Shanxi • Heavily polluting, inefficient• Had to covert rotary kilns or go bust • 75% of producers wiped out overnight • Prices up 70%
2007 – Refractory-grade bauxite
2009 – Flake Graphite, Inner Mongolia
2011 – Amorphous Graphite, Hunan
• Mine closures of older operations • Pollution and demand grounds
• Government-forced consolidation in Lutang
• Coal and amorphous graphite industries• 220 mines to 30 on pollution and
resource protection grounds
2012 – Flake Graphite, Jixi, Heilongjiang
Developing a value-added economy
• Exports of raw materials at the expense of resources/environment no longer viable
• Development of the production value-chain is critical
The 7 key industries China wants to develop 1. New energy2. New energy automotive3. New materials4. Energy saving and environmental protection5. Biological science6. New information industry7. High-end equipment manufacturing
2. Macro changes to mining in China
High quality, lower cost manufacturing
Consolidation – majority of production by the fewest companies
China wants to compete on quality and quantity
Output of top ten steel producers - % of total capacity
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
The China factor: production and policy
Graphite compared to other raw materialsThe Kooroshy Commodity Chart
Source: Resources Futures, Chatham House, London
Exports to imports for raw materials
• 2000 average import dependency: 15% • 2011 average import dependency: 40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Bauxite Copper Iron ore Cokingcoal
Average
2000
2011
China’s dependency on imported raw materials
Note: China is a net exporter of natural graphite
The medium term future for China
• In need of modernisation
• Increased focus on more efficient graphite mining
• Consolidation in flake will happen = when?
• High potential for export supply restrictions in favour ofvalue-added products
• Net exporter of graphite for foreseeable future
• China is industry leading with commercial spherical graphite
• China will compete in other advanced battery materials
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Exploration boom
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Exploration boom
2010: 5 exploration companies2011: 60 exploration companies2012: 125 listed graphite exploration companies*
*Tech Metals Research
Graphite Production & Exploration Map: Free at UNITECR 2013
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Prices
Volatility in commodity markets
Source: Resources Futures, Chatham House, London
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Prices
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Prices 2009-2013 – the era of volatility
2009
2010
2011
2012
2013
• Producers take capacity off-line in response to global economic crisis• Destocking cycle ensues
• Markets rebound stronger than anticipated • Suppliers cannot react quick enough, not enough inventory to satisfy
demand• Supply shortage• Price spike
• Flake graphite price reaches all time highs• +80 mesh, 94-97% C, CIF, Europe = $2,500/tonne • Situation + graphite’s green energy uses + no viable substitutes = boom
in new exploration
• H2 2012: Demand begins to slow
• H1 2013: Prices plummet as demand stagnates • China significantly struggles for the first time
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Price performance in 2013
Price trend in 2013:
2011: all time highs
Large flake +80 mesh, 94-97% C, flake graphite, CIF, Europe
• 2000-2009 av: : $823/tonne• September 2013: $1,350/tonne
Source: Industrial Minerals Data: Graphite price database - new
Indmin.com/GraphitePrices
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
Price performance in 2013
Medium flake-100 mesh, 94-97% C, CIF, Europe
• 2000-2009 av: $650/tonne
• September 2013: $1,050/tonne
Source: Industrial Minerals Data: Graphite price database - new
Indmin.com/GraphitePrices
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
What does the future hold?
• China has the ability, production power, resources to continue supplying the world like is has done so since 1980s
• Customer perspective is changing, however
• Supply security is high on the agenda = from the unknown of Chinese policy (the rare earths situation)
• Wide agreement graphite has been neglected for a generation = major interest in exploration scene
• Price volatility seen over last 5 years will continue as a result of changing buying patterns, not necessarily through a demand squeeze
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
What does the future hold?
My 5-year expectations in 5 points:
1. China to remain #1, supply restrictions to increase o Active: export quotas (magnesia, fluorspar, rare earths), tax increases =
less likely o Passive: Environmental crackdown (wasteful mines, polluting plants,
uses of certain acids), consolidation = more likely
2. Supply to increase outside of Chinao Expansions at existing mines: Brazil, Canada o New mines: Africa, Canada
3. Supply chain integrationo Refractory producers especially, buy far largest volume consumers of
flakeo Users to buy or have a stake in mines o A return to pre-1985 mentality
Simon Moores, Manager, Industrial Minerals Data – Connect [email protected]
What does the future hold?
4. Large flake graphite production increaseo > 80 mesh, 94% Co Through new mines outside of China = opportunity o The emergence of a new category = Jumbo flake, > 48 mesh
5. Raw material competition o Large flake graphite competition from batterieso > 80 mesh and larger most suitable for spherical graphite o New market which didn’t exist pre-2008
My 5-year expectations in 5 points:
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Graphite related products:
Industrial Minerals Data | Graphite = new • www.indmin.com/GraphiteAnalysis
Natural Graphite Report 2012-2016Supply, demand, price forecast
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