Graphite: Chinese supply recovers while Syrah cuts production on COVID-19 restrictions
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Posted 6th April 2020 in ?Industry news.
By Suzanne Shaw
Production of graphite in China began to recover gradually through March following COVID-19 closures. Meanwhile, as the virus spreads through other areas of the world, Mozambique’s Syrah Resources announced plans to suspend graphite production as of 28 March.
Chinese operations were originally shut in February for the Chinese New Year, but remained shut for a much longer period as restrictions were put in place to stop the spread of the virus. Reports of operators in the flake graphite production hub of Qingdao, Shandong reopening, began to be seen as early as late February, but the return of supply has been hampered to some extent by the voluntary self-isolation of staff and increasing domestic transport costs.
Syrah Resources has halted new flake graphite production because of restrictions imposed by the Mozambique government, but continues to process already mined material for now. There is currently no date suggested for the removal of these restrictions. The company has also suspended operations temporarily at its US battery materials plant in Louisiana which has been under a ‘Stay at Home Order’ since 23 March.
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Supply disruption has so far had a limited effect on prices, thanks mainly to lower demand for graphite. FastMarkets reports that the CIF European price of standard 94% C flake graphite increased by 2-3% for medium and large flake sizes during the first two months of 2020.
The lithium-ion battery industry has fuelled rapid growth in graphite demand in recent years but was suppressed in 2019 and early 2020 following major cuts to Chinese EV incentives early last year. Recovery is on the horizon, however, with Chinese EV purchase subsidies to be extended for two years from June 2020. This will likely provide a boost to demand for lithium-ion battery material feedstocks.
A return to much higher rates of demand could underpin a more positive trend in prices in the coming years, compounded by any potential effects from China’s on-going programme of environmental inspections that led to periodic mine and plant closures, as well as effects from any COVID-19 supply chain disruption.
Meanwhile, China continues to look with increasing interest at foreign sources of supply as it aims to reduce its dependence on upstream resource production. Syrah Resources became the largest graphite producer outside of China in 2018 and began to supply large quantities of flake graphite to China’s battery market; however, it scaled back production from September last year amid lower than expected recoveries and price achievement, and a concentrate ratio too heavily weighted towards lower priced fines.
Rising prices and increasing Chinese raw material demand will be good news for the industry, especially for the large number of flake graphite development projects worldwide.
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