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Refractory-grade graphite in 2013
Simon Moores, UNITECR 2013, Victoria, Canada
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
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 smoores@indmin.com
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
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 smoores@indmin.com
Where is natural flake graphite mined?
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Where is natural flake graphite consumed?
2012
Refractories, foundries and
crucibles - 39%
Batteries - 9%
Metallurgy - 28%
Lubricants - 9%
Part & components - 10%
Other - 5%
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 smoores@indmin.com
#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 energy
2. New energy automotive
3. New materials
4. Energy saving and environmental protection
5. Biological science
6. New information industry
7. 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 smoores@indmin.com
The China factor: production and policy
Graphite compared to other raw materials
The 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 Coking
coal
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 of
value-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 smoores@indmin.com
Exploration boom
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Exploration boom
2010: 5 exploration companies
2011: 60 exploration companies
2012: 125 listed graphite exploration companies*
*Tech Metals Research
Graphite Production & Exploration Map: Free at UNITECR 2013
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Prices
Volatility in commodity markets
Source: Resources Futures, Chatham House, London
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Prices
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
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 smoores@indmin.com
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 smoores@indmin.com
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 smoores@indmin.com
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 smoores@indmin.com
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 China
o Expansions at existing mines: Brazil, Canada
o New mines: Africa, Canada
3. Supply chain integration
o Refractory producers especially, buy far largest volume consumers of
flake
o Users to buy or have a stake in mines
o A return to pre-1985 mentality
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
What does the future hold?
4. Large flake graphite production increase
o > 80 mesh, 94% C
o 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 batteries
o > 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:
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Mike O’Driscoll,
Head of Research
Industrial Minerals Research
Email: modriscoll@indmin.com
Emma Hughes
Deputy Editor
Industrial Minerals
Email: ehughes@indmin.com
Ben Ash
Advertising & Sponsorship
Industrial Minerals
Email: bash@indmin.com
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Graphite related products:
Industrial Minerals Data | Graphite = new
• www.indmin.com/GraphiteAnalysis
Natural Graphite Report 2012-2016
Supply, demand, price forecast
• Discounts at UNITECR, enquire at booth
Natural Graphite Global Map 2013/2014
Production, Confirmed Resources, Trade Flows
• Published in 3 weeks, last advertising positions
remaining
Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
Thank you
smoores@indmin.com

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Refractory grade graphite: Seeking Chinese supply diversification

  • 1. Refractory-grade graphite in 2013 Simon Moores, UNITECR 2013, Victoria, Canada Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com www.indmin.com/GraphiteAnalysis
  • 2. 1. The situation 2. Production 3. China 4. Exploration boom 5. Prices 6. The future Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com
  • 3. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com 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
  • 4. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Where is natural flake graphite mined?
  • 5. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Where is natural flake graphite consumed? 2012 Refractories, foundries and crucibles - 39% Batteries - 9% Metallurgy - 28% Lubricants - 9% Part & components - 10% Other - 5%
  • 6. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 7. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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%
  • 8. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 9. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 10. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 11. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 12. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 13. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 14. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com #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
  • 15. 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:
  • 16. 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
  • 17. 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 energy 2. New energy automotive 3. New materials 4. Energy saving and environmental protection 5. Biological science 6. New information industry 7. High-end equipment manufacturing
  • 18. 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
  • 19. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com The China factor: production and policy Graphite compared to other raw materials The Kooroshy Commodity Chart Source: Resources Futures, Chatham House, London
  • 20. 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 Coking coal Average 2000 2011 China’s dependency on imported raw materials Note: China is a net exporter of natural graphite
  • 21. 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 of value-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
  • 22. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Exploration boom
  • 23. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Exploration boom 2010: 5 exploration companies 2011: 60 exploration companies 2012: 125 listed graphite exploration companies* *Tech Metals Research Graphite Production & Exploration Map: Free at UNITECR 2013
  • 24. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Prices Volatility in commodity markets Source: Resources Futures, Chatham House, London
  • 25. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Prices
  • 26. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com 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
  • 27. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com 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
  • 28. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com 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
  • 29. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com 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
  • 30. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com 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 China o Expansions at existing mines: Brazil, Canada o New mines: Africa, Canada 3. Supply chain integration o Refractory producers especially, buy far largest volume consumers of flake o Users to buy or have a stake in mines o A return to pre-1985 mentality
  • 31. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com What does the future hold? 4. Large flake graphite production increase o > 80 mesh, 94% C o 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 batteries o > 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:
  • 32. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Mike O’Driscoll, Head of Research Industrial Minerals Research Email: modriscoll@indmin.com Emma Hughes Deputy Editor Industrial Minerals Email: ehughes@indmin.com Ben Ash Advertising & Sponsorship Industrial Minerals Email: bash@indmin.com
  • 33. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Graphite related products: Industrial Minerals Data | Graphite = new • www.indmin.com/GraphiteAnalysis Natural Graphite Report 2012-2016 Supply, demand, price forecast • Discounts at UNITECR, enquire at booth Natural Graphite Global Map 2013/2014 Production, Confirmed Resources, Trade Flows • Published in 3 weeks, last advertising positions remaining
  • 34. Simon Moores, Manager, Industrial Minerals Data – Connect smoores@indmin.com Thank you smoores@indmin.com