What to expect for graphite in 2023?
Originally posted on Source.benchmarkminerals.com
Last year the battery anode market experienced significant growth, with supply of natural graphite struggling to keep pace.
This supply/demand imbalance during 2022 caused prices for -100 mesh flake graphite to rise by 25%, a trend which Benchmark anticipates to continue into 2023 on the back of incremental supply-side expansions in comparison to surging demand from the anode sector.
Demand for anodes grew by 46% in 2022, compared to a 14% growth in supply for flake graphite.
In 2022, the lithium-ion battery anode market became the biggest end-market for natural flake graphite, overtaking the traditional industrial applications including refractory and foundry industries, which will see graphite market fundamentals and pricing increasingly be controlled and guided by the battery market.
Rising prices on strong anode demand are expected to incentivise new supply in 2023, where four new mines are anticipated to join the flake graphite market. Alongside expansions at current mines in both China and Africa, supply is set to grow by around 15%.
Given sharply rising demand in the face of restricted supply, the graphite market is on track to undergo a deficit in its -100 mesh market, the preferred mesh size for anode manufacturing.
That deficit may see developments in the types of anode feedstock. This might include milling of larger mesh sizes to suit the battery market or the use of different mesh sizes to stymie a supply deficit. Sustaining a raw material shortage in the natural graphite anode value chain risks curtailing natural graphite anode market share.
Finally, ESG is set to play more of a role within the industry in 2023. More stringent ESG standards globally began to impact the anode supply chain in 2022, and the supply chain is expected to receive even more scrutiny in 2023.
Synthetic graphite anode supply grew by more than 30% during 2022, and is anticipated to even surpass that in 2023, given a supply deficit developing for natural graphite feedstock, pushing more producers to utilise synthetic graphite. There is also a preference from anode manufacturers to work with synthetic graphite in China, given plentiful feedstock availability, reliable quality, and a more consistent end-product.
Competition between battery manufacturers and anode producers for the highest quality coke feedstock increased during 2022, encouraging pre-calcined pet needle coke prices to rise sharply. This has led battery anode manufacturers to begin to search beyond the highest quality feedstock to use other low-sulphur pet and pitch cokes, and even consider the use of cheaper feedstocks with higher sulphur levels.
Looking forward, this trend is expected to continue into 2023. The steel industry’s shift towards electric arc furnaces is set to increase prices for high-quality coke feedstock and synthetic graphite, forcing anode producers to widen the pool of usable feedstock. That is set to expand feedstock availability for the synthetic graphite anode value chain, especially within China.
Outside of China, ever more stringent ESG standards will continue to encourage ex-China synthetic graphite anode aspirants to develop integrated operations powered by renewable energy in an effort to reduce their emissions and attempt to bring environmental externalities closer to natural graphite anode production.
Increased demand for anode material will see new ex-China synthetic graphite anode production capacity built by these players during 2023.
