GRAPHITE PRICING Current graphite prices US$/tonne (94-97%C) XL...

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

XL flake $1,950/t (+50 mesh)
Large flake 1,200/t (+80 mesh)
Medium flake $1,050/t (+100 to -80 mesh)
Small flake $850/t (-100 mesh)

Graphite prices are the Company’s estimates based on information from various industry sources.

THE LATEST!!
Graphite prices increased 30 to 40 per cent in the second half of 2017 albeit from a very low base. The increases were due to an improving steel industry, environmental related production problems in Shandong Province and continued strong demand growth from the lithium ion battery industry. Prices for +50 mesh XL flake graphite have experienced further increases in 2018 due to growing demand from the expandable graphite market and production issues in Shandong Province. This is expected to continue. Large flake graphite prices increased from 750/t to US$1,200 last year and have since remained stable. Lower production from Shandong and a recovering steel market is causing the market to tighten and may lead to further increases. Large flake prices are still well below the 2012 peak of US$2,800/t which was entirely due to the commodity super cycle and strong steel demand. Batteries were then a small part of the market. They are now approximately 25 per cent of demand and growing rapidly. Small flake graphite is used to make battery anode material and there is excess production capacity in Heilongjiang Province which has kept a lid on prices so far.



How is graphite priced?

Like uranium, there is a posted price for graphite which provides a guideline with respect to longer term trends but there are no spot or futures markets. Transactions are largely based on direct negotiations between buyers and sellers of which there are many. 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.

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 and consumption. After peaking in 2012, graphite prices 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 will probably 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 and supply is tight. The steel industry is also recovering. As a result, the outlook for higher large and XL fake prices is very positive.


Source:Northern Graphite.