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A study of the global graphite industry
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TZMI.COM
2011 2014
T Z M I
Project shí mò (石墨) A global study of the graphite market with a focus on the influence of China over the next decade.
PROJECT OVERVIEW
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 2
TZ Minerals International Pty Ltd (TZMI) is a leading global consulting firm that analyses opaque mineral and metal markets for the worlds largest mining,
financing and OEM companies.
shí mò (石墨) - the mandarin word for graphite
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 3
Bull or bear – can you afford to not be informed?
• Graphite stocks have skyrocketed in recent years with some suggesting a market bubble that is about to burst.
• China has recently begun seriously clamping down on environmentally unfriendly industrial practices – is this a supply risk?
• Is the world on the verge of the electric car revolution – Tesla thinks so.
• But, what about the future of electric arc furnace (EAF) capacity in a world of slowing growth?
• One point is true – there is a lot of assumptions being made in the graphite industry – what are the facts and plausible future scenarios?
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 4
About TZMI – experts in techno-economic market evaluations
TZMI is a global, independent consulting and publishing company with offices in Australia, the US, Europe, Africa and China. The strength of TZMI’s consulting services stems from extensive practical experience in opaque mineral and metal industries.
We are a consulting house of qualified chemical engineers, metallurgists, geologist and mining engineers, backed by a multi-lingual research and data team.
TZMI provides operational and technical expert advice on
many areas including:
Mergers and acquisitions
Market assessments and industry analysis
Due diligence
Pre-feasibility studies incl. preliminary capital and
operating cost estimation
Competitive cost analysis and benchmarking
Technical reviews and audits
Resource assessments
Physical separation test work
Flowsheet development
Customised data analysis and reporting
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 5
Here is some of the current assumptions being made about graphite
80%
Brazil 8%
China
4%
India 7%
Other
Will China be the main natural graphite supplier in 2024?
0
20,000
40,000
60,000
80,000
100,000
19
80
19
85
19
90
19
95
20
00
20
03
19
75
Source: USGS
8%
11%
Synthetic Graphite Other
Synthetic Graphite Blocks
Synthetic Carbon Fibers
31%
Synthetic Graphite Electrode 42%
Natural & Synthetic Graphite Powder
8%
Worldwide graphite market US$ 13
Billion
40%
Refractory & foundry
Other
Lubricants 8%
Metallurgy
3%
Industrial components
Batteries
10%
30%
9%
Graphite market share by country
Graphite market by application Graphite market by value
Apparent natural graphite demand
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 6
IT IS CRITICAL TO UNDERSTAND THE TYPE OF GRAPHITE REQUIRED BY EACH APPLICATION
WHAT ARE THE PROBALISTIC FUTURE MARKET CONDITIONS OF EXISTING GRAPHITE APPLICATIONS?
GROWTH FROM EMGERING APPLICATIONS – WHAT ARE THE POSSIBLE SCENARIOS?
WHAT ARE THE FUTURE DEMAND CASES BASED ON TYPE AND QUALITY OF GRAPHITE REQUIRED?
There is a wide range of applications – what is future demand and why?
Refractory & Foundry
• Steel
• Ceramics
• Glass
• Cement
• Petrochemical
Batteries
• Portable energy
• Electric vehicles
• Other
Metallurgy
• Carbon additives
Lubricants
• Offshore drilling
Industrial Components
• Friction materials
• Pencils
Other uses
• Polymers
Pebble bed nuclear reactors
Ceramic armour fibres and tiles Oil sand recovery
Graphene
EMERGING APPLICATIONS
50% Natural 50% Synthetic 63%
36% Flake
Amorphous
Vein
1%
These examples are not exhaustive
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 7
Graphite market research thesis M
arke
t o
verv
iew
Forces acting on China’s graphite market In volumetric terms, China is the largest graphite producer and consumer in the world, producing two-thirds of the world’s flake graphite and 90% of its amorphous graphite. Production was estimated at 650 thousand tonnes in 2010 from reserves of 50 million tonnes. China is a net exporter of all forms of graphite, estimated at 480 thousand tonnes. Graphite is a strategic mineral in China, meaning that state policy is crafted to ensuring the long term prevalence of the industry amid concerns that China is over-exporting minerals that could be processed at home.
China’s supply-side is highly fragmented, with nearly 200 mining enterprises and well over 2,000 processors but there is limited ability to produce large flake or 80 mesh. In terms of application, refractories account for 40% of demand for graphite. Other key segments include electric-arc furnaces and performance materials. Customers originate from China’s metallurgy, petrochemicals, machinery, electronics, power and defence industries.
Industrial consolidation: overcapacity is said to be hurting the industry’s discipline and quality and environmental damage is also gaining the attention of the government. The study will examine the efforts of regulators to rationalise capacity and forecast the amount of effective capacity in China for the next 10 years with analysis of implications for importers of graphite.
New energy market: significant levels of investment have gone into new energy industries such as solar and electric vehicles, some of which has been well invested while other funds have not been effective. This study will quantify the demand for graphite from this new industry over the next decade and examine demand trends and drivers.
Macroeconomic trends: China’s structural and cyclical dynamics will be analysed with an assessment of the impact on the end-use markets for graphite.
Demographics: a full quantitative model of the top down and bottom up aspects of China’s graphite market will be provided, with qualitative insights into the market’s development.
Micro-economics: full value chain cost – volume analysis from the mining to processing to understand the pressure points of the local industry.
New energy
Shifting demo-
graphics
Over-capacity
Cost dynamics
Consolidation
Structural reform
Fixed asset in-vestment
Mar
ket
stu
dy
the
me
s
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 8
Proposed scope of the global graphite market multi-client study
Mining
Beneficiation
Graphitisation
Purification
Fabrication
Finishing
TZMI will survey miners in the north and northeast Chinese production centres to clarify future production and pricing trends in light of consolidation and modernisation. Cost dynamics are expected to play a key role in determining future supply. The survey will comprise multiple in-person site visits to gain facts and expert insights. A profile for each producer will also be provided.
Natural graphite
Synthetic graphite*
The purification of graphite covers a larger number of companies working with grades from as low as 50% up to 90% and finishing with a product above 98%. Central to understanding this segment of the market is the profitability, given the crackdown by regulators on small, energy-intensive processors. Trade will also be a key topic: China imported 70,000 tonnes of processed graphite in 2012 and the balance between industry consolidation and value-add improvement is likely to have implications for the global market.
TZMI will provide an independently calculated supply-demand balance by surveying a large number of graphite customers in end-users industries. Usage intensities and consumption trends will be explored in conjunction with the major industrial and macroeconomic shifts China is undergoing. *synthetic graphite will be surveyed separately and included in project Shimo.
75-100 interviews
50-80 interviews
200+ interviews
The greatest unknown is China supply in the future
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 9
Project methodology – this is how we discover the facts!
Requirements mapping
Background research
Research team
selection
Questionnaires Primary research
Research verification
Sampling Subject matter expert
Secondary research
Data collection, sorting and processing
Multivariate, value-added analysis
Study written, reviewed and released
The chart above shows the basic research process used by TZMI on its research assignments in China. The main stages are the research design, primary and secondary research, data processing, value-added analysis and writing. Peer and subject matter expert review play a crucial role in shaping the final product. The following pages provide details on our complete methodology.
Requirements mapping. TZMI approaches research projects with the end in mind. In addition to the hypotheses we have developed, our industry contacts and potential participants will contribute ideas and requirements. These requirements are then broken down into questions and mapped to a set of long and short questionnaires used in a primary survey of the industry.
Sampling. A statistically meaningful sample of interview targets is calculated from basic industry sizing and concentration. As the effective sample size falls with greater and more complex questions, some segments are allocated more interviews than others.
Weighting. TZMI uses a probability weighting based on size. For example a company producing two tonnes of pigment has twice the weighting than a company producing one tonne. This influences, among other items, sample averages.
Sample bias. The sample may be biased towards the characteristics of larger producers. This has been factored into final calculations.
TZMI doesn’t give more oxygen to old data – we find out what’s really going on
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 10
We present our facts in clear to digest formats
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 11
Chapter Description
Introduction Description of methodology used and definitions
Market overview Overview of global market (2012-1H 2014)
Market trends Major thesis about market changes explored and tested
Graphite products Review of graphite products, production methods and final products
Graphite production World graphite production by country, will detailed Chinese mine and plant.
Graphite applications Description of existing and emerging applications with the type of graphite needed.
Graphite demand Differentiation of demand by graphite type. Impact of existing and emerging applications
Graphite new supply Review of new projects worldwide
China focus Strategic review of China supply/demand.
Graphite trade Graphite trade worldwide (2012-1H 2014). Impact on changes of Chinese exports.
Graphite to 2024 Graphite supply/ demand scenarios
Suggested table of contents
Proposed table of contents
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 12
You don’t get a collection of internet-based research from TZMI
TZMI’s knowledge-value pyramid
The three major deliverables of Shimo are:
1. A multi-tab integrated excel model of the mining and beneficiation of graphite (including a trade balance), graphitisation and purification, and segmented consumption covering the period of 2012 - 2024. Key parameters of the model will be interactive, enabling multiple scenario analysis over a longer period of use.
2. A detailed fact-driven report with quantitative and qualitative analysis of the supply and demand of graphite. Profiles of the major participants for the base year 2013 will be included. Demand will be segmented by region, industry and grade.
3. A customized presentation of the aspects of this large body that translate into actionable recommendations for your business. Options to deliver in-person in most global locations.
The deliverable is based on a large primary research survey to be conducted in Q3 2014. Behind the scenes support will be available from TZMI’s team before, during and after project Shimo.
The option to tailor specific parts of the survey is also available as on-going review meetings can be held with the research team during the project.
Value added analysis from a 300+ page report providing segmented analysis, profiles and recommendations
Interactive multi-year Excel model
Synthesis: actionable recommendations
Primary research survey of several hundred market
participants
Insight from market veterans,
product & technology experts and regulators
A comprehensive library of
secondary research data and previous project
experience
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 13
Graphite supply – is the world about the change?
Top natural graphite producers China supply influence
Although China is a major player producing over 70% of world graphite, about 60-70% of this supply is very fine flake, or amorphous graphite, with the rest being flake. Chinese mines do produce large flake graphite, but the majority of production is very small around the +200 mesh range. China is said to have 400 graphite mines with the majority being in the East and North of the country.
During the late 1980s China dumped large stockpiles of natural graphite onto the open market, resulting in a crash in price. This resulted in graphite projects around the world being abandoned during 1989-1991. Not only did western mines closed, but apparently so did many of the smaller and seasonal Chinese mines.
With China’s growing steel industry and their graphite mines becoming depleted, with all the easily mined oxide materials having been mined, Chinese miners are now moving into deeper and subsequently more expensive deposits.
• Jixi Liumao Graphite Resource – Heilongjiang, China
• Heilongjiang Austrian Yu Graphite – Heilongjiang, China
• Qingdao Haide Graphite Co. - Shandong, China
• Chenzhou Lutang Crystalline Graphite – Hunan, China
• Nacional de Graphite – Bahia, Brazil
• Karaback Metal & Mining – Izmir, Turkey
• Qingdao Hensen Graphite – Shandong, China
• Lubei Yxaing Graphite – Hebei, China
• Extractive Metaquina – Bahia, Brazil
• Graphite Kaiserberg – Styria, Austria
There are several hundred smaller producers in China plus a LONG list of aspiring new miners
August 2014 PROJECT SHIMO – GRAPHITE MARKET STUDY © 2014 14
TZMI’s research and analysis team is a mixture of experienced professionals from China and the West. There will be three teams of researchers assigned to this project. All are tertiary qualified, principally in the sciences (typically in chemistry, metallurgy and mining) and also from economics and statistics backgrounds.
Our team is trained in rigorous and ethical research practises as well as in our China specific project management system. TZMI is compliant with SCIP and similar standards.
TZMI researchers and project managers have successfully completed strategic research projects in many minerals markets, including mineral sands and titanium, iron ore, graphite and carbon EAF electrodes, as well as a large and diverse number of chemical and industrial markets.
TZMI maintains good working relations with a large number of participants in China’s minerals and chemicals industries.
So how do you find out more?
Register your expression of interest by with David McCoy. This is non-binding. A comprehensive proposal and draft scope of work document will then be discussed with your primary contact. This will enable your organisation to add particular focus areas to the study (within the limits of the project). TZMI will collate scope of work documents into a single Formal Scope of Work document.
TZMI’s Shanghai office David McCoy Managing Consultant, Markets and Strategy
[email protected] +61 8 9359 6000
Ed Barlow China Country Manager, Markets and Strategy
[email protected] +86 (2) 6163 4080
This project will only be open to companies that participate before the commencement.
Deadline for registration of interest is Friday 8 August.
TZMI.COM
2011 2013
Global delivery of insight and expert advice
T Z M I