Graphite Prices Stabilize, but Key Steel Sector Demand in 2013 Unlikely

Graphite prices, which fell about 15 to 20 percent until May of this year, have stabilized in the past few months. But for prices to move up next year, the steel industry will have to be more confident about an increase in business.

“If we look at 80 to 100 mesh, 94 carbon, which is a good quality graphite, we started seeing a slowdown in price from the end of 2011,” Simon Moores, data manager at Industrial Minerals, told Graphite Investing News in an interview. He added that about 70 percent of graphite produced is used for refractories in the steel industry.

“From January to June of this year, prices of graphite fell on average 15 percent to 20 percent,” Moores added. “In July, August, September, prices have stabilized somewhat and flattened out. We have not seen prices fall since May.”

Current prices for 80 to 100 mesh, 94 carbon flake graphite are between $1,300 and $1,700 a tonne, Moores said. Earlier this year, they were above $2,500 a tonne.

“We are now heading into the winter period slowdown and will have to wait until the first quarter of 2013, when buyers look at their inventories for the year to see how prices develop,” Moores said. “For a major turnaround in prices, these customers will have to be far more confident of increasing business than in 2012, which at present is not looking likely.”

According to industry estimates, current graphite production is about 1.1 million tons annually and demand is growing at about 5 percent a year. Demand is seen reaching 1.6 million tons in just under five years if new applications for graphite in lithium-ion batteries and Pebble-bed nuclear reactors take hold. As China controls more than three-fourths of global production, there are fears that it could restrict exports and cause a supply disruption.

“I do not think China will put a quota on graphite,” Moores said. “The problem will be a supply of flake graphite as China cleans up old mines and the graphite industry consolidates in China. The big thing for China and its mining industry is pollution and resource protection. The country has already consolidated its amorphous operations in Hunan province, so graphite is on its radar. This is where the supply restrictions will come from.”

Moores added, “when you have 78 percent of total graphite coming from China, that is not a healthy situation, and major buyers, such as Brazilian refractories producer Magnesita, are now looking to become 100 percent self-sufficient in graphite because they don’t trust Chinese supply long term.”

Company news

Lomiko Metals (TSXV:LMR) identified the presence of large-flake graphite in multiple holes after drilling 23 holes totalling 1,600 meters at its Quatre Milles East flake graphite property in Quebec. Drill results will be released in mid-October and the company needs to finance the second phase of the project, which will involve drilling another 50 holes, CEO Paul Gill told the Financial Post in an interview.

Magnesita Refratarios (OTC Pink:MFRSY), a Brazilian company that manufactures the materials used in steel-making furnaces and mine operators, said it obtained a license to build a new graphite plant. The plant, which will be located in the Brazilian state of Minas Gerais, will produce as much as 40,000 tons of graphite per year, Magnesita said in a regulatory filing.

Energizer Resources (TSX:EGZ,OTCBB:ENZR) said assay results from its Molo deposit in Madagascar continue to confirm that it has a very large footprint. The company received assay results from an additional nine diamond drill holes and one trench.

Northern Graphite (TSXV:NGC) started a follow-up drill program consisting of about 3,000 meters of drilling in 65 holes at its Bissett Creek project. The main objective of the program is to upgrade inferred resources both within and outside the feasibility study pit shell to the indicated category. The study considers approximately 1.5 million tonnes of inferred resources within the pit as waste and includes the processing of a low-grade stockpile that exceeds 2.5 million tonnes.

Focus Graphite (TSXV:FMS,OTCQX:FCSMF) said it will issue news summarizing the results of its NI 43-101 compliant preliminary economic assessment for its Lac Knife, Quebec, graphite venture no later than October 31. The deadline arose due to a requirement set by the Ontario Securities Commission.

 

Securities Disclosure: I, Karan Kumar, hold no direct investment interest in any company mentioned in this article.