Has China Reached Peak Graphite?

From Shenzhen, China

Benchmark Mineral Intelligence can reveal that China’s share of global natural graphite output will fall by 15% this year to levels not seen since the mid-1990s when the country began exporting to international markets.

2014 will see output fall to 70% of the world’s share from an all-time high of 85% in 2013.

This raises the major talking point of whether we have seen peak graphite from the world’s leading supplier.

This year has been notable for the Chinese graphite industry as it consolidates and modernises its flake operations and cuts output of its amorphous graphite.

Both forms of natural graphite contributed to significant output levels in the past of as high as 800,000 tonnes a year. But this figure has now fallen by at least 40% as the country recalibrates its domestic steel industry, modernises its mining operations and focuses its future on higher value manufacturing.

As a result of these trends which are backed by the new data, Benchmark Mineral Intelligence believes we have likely seen peak graphite supply in China.

However, the industry can expect the receding of supply to be a steady process which cuts output levels to between 50-60% of global production over the next 3-5 years.

This means China will continue to be the world’s number one supplier of all natural graphite products in the long term. The country will try and replace raw material exports with that of value added products including coated, battery anode materials and graphene.

Existing demand from steel is expected to continue with low growth rates of 1-3% a year, therefore the industry will look to the battery sector for the bulk of new demand which Benchmark expects to be anything from 5 to 10 times the growth seen in refractories.

And with three megafactories slated to come on-stream in the next three years, the question is will the natural graphite industry be able supply these new projects or will buyers will have to turn to its synthetic counterpart?

It also raises the point of where new supply will come from to satisfy existing growing markets let alone the emergence of a potentially huge market in batteries.

Regardless what the future holds, one thing is clear in the present: the days of low cost, abundant graphite from China are over.