Natural graphite concentrate supply is moving west away from China towards East Africa. According to UK energy research and consultancy firm Wood Mackenzie, demand from battery makers will force the supply chain west as China’s natural graphite concentrate supply chain falls from 68% of the market share in 2017 to 31% of the market in 2040.
Recent tariff changes have already begun to show in China’s import statistics. In 2018, as a result of growing African graphite supply, China became a major flake graphite importer for the first time in a generation, with flake volumes over 60,000 tonnes for the year over a period which also saw a 12% decline in Chinese exports. This trend has continued into 2019, with import data showing that in February 2019, China imported approximately 13,500 tonnes of flake graphite.
The Chinese Government is encouraging trade with Africa by means of zero tariffs on imported goods and Chinese suppliers have already begun to acknowledge that new graphite supply from Mozambique and Madagascar are beginning to compete within the Chinese market, by providing low cost feedstock, which is often of a higher quality. In 2018, Madagascar was the second largest offshore supplier of natural graphite to China after Mozambique.
The rising Chinese supply constraints coupled with the rising interest in the graphite market more broadly, and for use in the battery sector specifically, have resulted in China now being open to global graphite. According to Energy Storage Journal (Feb 21, 2019), “Production costs have been rising and supply falling in China since 2016 amid plant closures, mainly in the Shandong and Heilongjiang provinces, the centres for the country’s flake graphite and spherical graphite processing industry and mine.”
As this story continues to unfold over the course of the year, it is expected that number of smaller Chinese operations will be displaced by African suppliers and China will become a net importer of flake graphite for the first time. BlackEarth Minerals NL (ASX:BEM) is perfectly positioned to become a leading supplier of high grade large flake graphite to the Chinese market.
On 1 May 2019, the Company appointed Australia Minerals & Resources (“AustMin”) as strategic offtake advisors for the Chinese market. Founder and Chairman of AustMin, Eileen Hao, is a graphite specialist with significant experience working in industrial minerals, metals and applications, specialising on lithium-ion battery materials and graphite applications both in China and globally. Ms. Hao has held senior management roles and provided technical and commercial consultancy services to leading international companies operating in the graphite industry, including Imerys, Superior Graphite (USA), Syrah Resources Limited (ASX:SYR) as well as acting as a Senior Consultant for Roskill Information Services.
BlackEarth continues to advance its portfolio of Madagascan graphite projects concurrently with discussions in China surrounding offtake agreements and independent product testing of its high quality graphite concentrate.
Jane Morgan Management