Find more graphite – demand is rising and supply is potentially doubtful

graphite.jpgBrent Nykoliation, Vice-President, Business Development, Energizer Resources says of graphite, “this strategic element is already heralded as the commodity to watch in 2012. Graphite and diamonds are the only two naturally formed polymers of carbon – graphite is a two-dimensional crystal structure, whereas diamonds are a three dimensional structure. Graphite is an excellent conductor of heat and electricity and has the highest natural strength and stiffness of any material. It maintains its strength and stability to temperatures in excess of 3,600°C and is very resistant to chemical attack. At the same time it is one of the lightest of all reinforcing agents and has high natural lubricity.”

The US, which imports all its graphite, has joined China and the European Union in classifying graphite as a critical strategic material.

“World production of graphite,” Nykoliation continues, is about 1.1 Mt/y, which is almost as large as the nickel market (1.3 Mt/y), and more than 50 times the size of the lithium or rare earth markets.

“60%-70% of the world’s graphite supply is amorphous (fine or powder) and is used for traditional purposes such as automotive and steel making. 30%-40% is flake, which is essential for producing batteries, specifically lithium-ion, and for use in consumer electronics

“China currently produces around 75% of the world’s graphite or about 800,000 t of the estimated 1.1 Mt produced in calendar 2010.

“This year, the British Geological Survey listed graphite, along with antimony and rare earths, as most at risk of global supply disruption. Graphite had a relative supply risk index of 7, compared with 8.5 for antimony, the highest value on the index.

“Despite producing 75% of the world’s graphite, most of China’s resources are lower grade amorphous. It is now the biggest importer of graphite and has closed state-owned enterprises this year to preserve its graphite resources. It has imposed a 20% export duty plus a 17% VAT, and instituted an export licensing system to ensure supply to China’s domestic economy.

“Annual graphite demand is expected to increase by 50% from 1.1 Mt to 1.5 Mt by 2020 based on the steel market alone. Demand from batteries and high-tech applications are projected to be dramatic. Lithium-ion batteries are projected to more than double the demand for graphite to about 2.6 Mt by 2020. Industry analysts predict the discovery of Graphene will be a major driver of graphite demand.

“Graphite pricing is determined by two factors – flake size and purity – with the premium product being large flake (+80 mesh), high carbon (+94%) graphite.

“Like uranium and vanadium, there is a spot price for graphite that provides an indication of longer-term trends but transactions are primarily based on a direct and intimate relationship between the buyer and seller.”

Nykoliation concludes that the bottom line is that “China is creating serious supply concerns for the rest of the world. New graphite sources will be needed for both traditional and high-tech/clean tech applications.”