VANCOUVER (miningweekly.com) – Graphite suppliers are expecting prices to fall by between 10% to 18% as China starts removing a 20% duty on all natural graphite exports from 2017 onwards, London-based Benchmark Mineral Intelligence said Thursday.
When the duty is eventually removed, global prices are expected to experience “serious downward pressure” as China – which already hosts many of the lowest cost producers in the world – will be able to export at prices up to 20% lower than current market rates, Benchmark consultant Andrew Miller said in a company blog.
The duty is expected to only apply to flake graphite concentrate, rather than its value-added derivatives such as expandable and spherical graphite, he points out.
Miller warned prices were headed to “unprecedented lows” in an industry that has experienced almost five consecutive years of downward market pressures. It threatens not only the existence of established producers elsewhere but also several development stage projects, with higher production costs, Miller explains.
China will also by year-end implement an environmental tax on graphite producers to clean up some of the country’s less efficient operations and potentially ramp up consolidation in the industry, Benchmark said.
Miller expects many established and development-stage projects to think about value-added production, which pricing structures are expected mostly unaffected. “The news will have little impact on their business models. But for the few outside of China which try and compete in the flake concentrate market, troubling times could be ahead,” he cautioned.
While it is too early to judge the true impact of this type of announcement for the wider industry, it does signify a major shift in China’s approach to the graphite market, Miller said.