Tight supply to underpin China graphite market in 2023

Chinese graphite flake prices are at historic highs. And supply is likely to remain tight in the new year, given a swiftly expanding downstream anode material industry and rapid growth of the new energy vehicle (NEV) industry.

Prices for 94pc graphite flake have been assessed at 5,200-5,800 yuan/t ($743-829/t) ex-works since 28 November — the highest since Argus assessments began in October 2018.

China's average domestic graphite flake price was Yn5,097t ex-works in 2022, up by 32.3pc from 2021, according to Argus assessments.

The flake price was pushed to a record high by tight supply and winter stockpiling by spherical graphite and anode material producers.

Output in Heilongjiang province — China's largest flake production hub — fell in January-May because of environmental inspections, Covid outbreaks and low temperatures. Production was again lower in November and December because of a lack of heating.

Consumer demand has increased this quarter as spherical graphite and anode material producers have started to restock.

Tight flake supply is expected to persist in the first quarter of 2023, but to ease after Heilongjiang producers resume production. New anode material capacity will continue to support demand for graphite flake feedstock in 2023.

Fast anode capacity expansion

BTR New Material — China's largest lithium-ion battery graphite flake anode material producer — is building a 200,000 t/yr anode material plant at Dali city in southwest China's Yunnan province. The 50,000 t/yr first phase is due on line in 2023.

The firm expects global demand for anode materials used in lithium-ion batteries to increase to 2mn t in 2025 from less than 1mn t/yr at present.

Another key anode producer, Ningbo Shanshan, is working to raise capacity and secure more market share. It launched the first phase of a 100,000 t/yr anode materials and graphitisation plant in Sichuan in August, and is due to launch the first phase of a 200,000 t/yr anode materials plant in Yunnan in 2023.

Shanshan says its overall anode material capacity hit 180,000 t/yr in 2022, up from 120,000 t/yr in 2021. It is targeting 300,000 t/yr in 2023.

Another major producer, Putailai, is expected to the launch the 10,000 t/yr first phase of an anode material plant in Sichuan in 2023. It expects anode material sales to have reached 150,000t in 2022, up from 97,242t in 2021.

Other anode producers — including Shangtai Technology, Zhongke Electric, Guangdong Kaixjin and XFH — are also building plants that are expected to launch in 2023 and 2024.

New graphite flake capacity

To cope with the anode material industry's swift expansion, graphite flake producers have been adding capacity.

Jixi Northeast Asia Mineral Resources is building a 100,000 t/yr graphite flake plant that is on track to launch in 2023.

The country's largest metal mining firm, China Minmetals, is building a production complex in Hegang city, with a designed production capacity of of 6mn t/yr of graphite flake ore, 200,000 t/yr of refined flake powder, 50,000 t/yr of spherical graphite, 50,000 t/yr of high-purity graphite and 50,000 t/yr of flake anode materials. This is also due to start up 2023.

BTR New Material is building a plant in Luobei county in Hegang city the northeast Heilongjiang province that will be able to produce 400,000 t/yr of graphite flake and 200,000 t/yr of spherical graphite and anode materials. The first phase — 200,000 t/yr of graphite flake and 50,000 t/yr of spherical graphite and anode materials capacity — will be launched in 2023.

China will continue to exempt NEVs from its vehicle purchase tax in 2023 to support industry development, boost uptake and help reduce emissions.

Argus expects global EV sales to reach 31mn in 2032 — driven by Chinese and European adoption — up from 6.23mn last year. This will probably boost demand for power batteries and battery metals such as cobalt, lithium, nickel, manganese and graphite.

Argus expects global natural graphite demand to more than double by 2027 — to 3.1mn t from 1.4mn t in 2022 — driven by demand from the NEV sector, which is expected to grow at a compounded annual rate of 34pc over the same period.