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TSX-V: NGC     Last: 0.17     Change: 0.00
TSX-V: NGC     Last: 0.17     Change: 0.00

Current graphite prices - US$/tonne
(94-97%C)

XL flake $1,800/t (+50 mesh)
Large flake $830/t (+80 mesh)
Medium flake $700/t (+100 to -80 mesh)
Small flake $550/t (-100 mesh)

After peaking in 2012, graphite prices experienced a sharp drop due to the slowdown in the Chinese economy and a lack of growth in western economies.  Since that time they have been sideways to down as the market waits for continuing growth in the EV and the lithium ion battery industries to use up excess capacity in China.  The capacity issue has been exacerbated by the commissioning of a large new mine in Africa approximately two years ago.  The mine was well over budget, has only operated at 50 or 60 per cent of design capacity on a consistant basis and has been cash flow negative from the start.  In 2019 it produced 153,000 tonnes but only 15,000 tonnes in the fourth quarter due to low prices and continuing operating losses.  Its production will likely be much lower in 2020 which may lead to an improvement in prices during the year.  In the near term this supply will be replaced by surplus production capacity in China.  However, substantial new sources of supply are urgently needed if the expectations of automobile and battery makers are to be even partially realized.

Lithium ion batteries are now approximately 25 per cent of graphite demand and continue to grow rapidly even though the uptake of EVs has been slower than anticipated.  Mines in China and the new mine in Africa mainly produce small flake graphite which is used to make battery anode material.  The current picture for large flake prices is much better as Chinese production is declining, the African operation does not produce much and demand is growing.  Benchmark Mineral Intelligence estimates that the major auto makers have committed over US$300 billion to developing EVs and that there are over 100 LiB mega-factories in the pipeline.  These factories represent over 2,000 gWh of LiB production capacity which in turn equates to 800,000 tonnes of new annual graphite demand by 2023 and 1.4 million tonnes by 2028. As a result, the outlook for graphite demand and prices is very bright.

Graphite pricing chart

How is graphite priced?

There are no standard, quoted prices for natural graphite and there is no spot or futures market.  Companies such as Benchmark Mineral Intelligence and Fastmarkets IM are paid subscription services that provide pricing information based on periodically surveying buyers and sellers. Actual transactions in the marketplace are largely based on direct negotiations between the buyer and seller. Graphite prices are also a function of flake size and purity with large (+80 mesh) and particularly XL flake (+50 mesh) and 94% plus carbon varieties commanding premium pricing. Prices for +80 mesh large flake exceeded US$1,300/t in the late 80s but crashed to US$600-750t in the 90s as Chinese producers dumped product on the market. During this period there was essentially no exploration and no new mines were built in the west.

Graphite prices did not start to recover until 2005 and well surpassed US$1,300/t with large flake selling for up to $3,000/t in early 2012 with some shortages reported. Price appreciation was largely a function of the commodity super cycle and the industrialization of emerging economies as new, high growth applications such as Li ion batteries ("LiBs") had not yet had an impact on demand or consumption. Graphite prices subsequently again declined to the $750/t area for large flake graphite due to the strength in the US dollar, the slowdown in China and the lack of growth in Japan/Europe/US.

Lithium ion batteries were a very small part of the market seven or eight years ago but have been growing at over 20% annually due to the explosion in the use of cell phones, lap tops, cameras, power tools, etc.  LiBs now account for approximately 25% of the graphite market and are expected to continue growing rapidly due to the increasing sales of electric and hybrid electric vehicles as well as grid storage solutions.  These applications use much larger batteries, are much larger markets than the small device market and are still in their infancy.  While China has surplus small flake production capacity, which is used to make the anode material for lithium ion batteries, the potential demand from LiB manufacturing capacity that is currently under construction is significantly higher than the extra capacity.  This should lead to higher prices in the future.

Chinese production of large and XL flake graphite is declining as traditional mining areas in Shandong Province are depleted or shut down for environmental reasons.  At the same time, industrial demand for the larger flake sizes is growing strongly.  The steel industry is also recovering.  As a result, the outlook for large and XL fake prices is more positive.

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