Introduction In 2012, global production totaled 1.3 million tons, with China accounting for approximately 800,000 tons. Global annual consumption of natural graphite was around 1.3 million tons. The primary sources of crystalline flake graphite and flake dust graphite are China, Canada, and Madagascar, among others. The main applications of graphite include: the steel industry, refractory materials, pencils, nuclear reactors, various component materials used in automobile manufacturing, and golf clubs. In particular, once electric vehicles take off, the outlook for the graphite market—as a key material for lithium-ion batteries—will become even more promising.

I. Tight supply and demand spur price increases.
Kirill Mugerman, an analyst at National Securities Corporation, headquartered in Canada, recently released a report pointing out that the rapid surge in prices is gradually piquing the mining industry’s interest in graphite. It is widely believed that graphite is rapidly emerging as the “black gold.” Yet for a long time, graphite has been regarded merely as a raw material extensively used in various industries—and due to its extremely limited availability, it has long been overlooked. Only in recent years has the dramatic rise in graphite prices undeniably sparked intense interest across the industry. However, currently, very little data on graphite is readily available.
Based on projections of future changes in the global supply and demand for graphite, by 2020—at least four and at most 23 graphite mines will need to be built and put into operation, excluding China and India, to meet growing demand. Like most other industrial metals, the price of graphite is determined through direct negotiations between buyers and sellers based on a common benchmark price. The key price parameters depend on the size and purity of the graphite flake specifications. Various different parameters collectively define the range of graphite prices.
The industry standard for natural graphite purity is a carbon content of 94% to 97%. Under conditions of constant purity, an increase in flake size can gradually enhance the product’s premium price. Conversely, when purity declines while flake size remains unchanged, the price will drop significantly. While higher purity or changes in product form—such as spherical graphite or expanded graphite—command prices that are far from ordinary market quotes, known prices have reached over US$20,000 per ton. From the early 1990s to 2005, influenced by China’s low-cost production, market prices were notably depressed, falling below US$1,000 per ton. Since then, driven by robust demand from green technology sectors, export controls, stricter environmental regulations, the depletion of many mines, rising energy prices, and increased transportation costs, graphite prices have surged.
 
II. Utilization and Demand for Graphite
The primary uses of graphite are in the steel and refractory industries, accounting for over 40% of global total production. Other major applications include lubricants, expanded graphite products, and carbon-based materials. However, the fastest-growing sector is energy applications. In many emerging applications, it is anticipated that engineering technology sectors will be phased out in the future—mainly due to high costs or because of the availability of superior synthetic materials. The interplay between natural graphite and synthetic graphite is still largely driven by price and purity considerations.
Synthetic graphite has poorer conductivity than natural graphite and is significantly more expensive. It can be engineered to meet precisely specified requirements for a wide variety of applications. The main types include: Primary synthetic graphite, with a purity of 99.9%, is produced by calcining petroleum coke and coal tar pitch in an electric furnace. Its primary uses are in electrodes and carbon brushes. Regenerated powdered or waste synthetic graphite is manufactured by heating and calcining petroleum pitch; it is mainly used in refractory materials and other applications. Fiber-grade synthetic graphite is produced from organic materials such as rayon, coal tar pitch, and other synthetic organic polymer resins; it is primarily used for insulation and as a reinforcing agent in polymer composites.
On the other hand, natural graphite can be upgraded to a higher grade under the same specification conditions by enhancing its thermal and chemical properties. In the 1990s, China adopted a low-cost chemical purification method; however, from the perspective of Western countries, this method was considered uneconomical. Subsequently, processing and purification techniques were improved, and there emerged a growing demand for high-purity, large-flake graphite that requires minimal further purification. Natural graphite also has another advantage: it can be processed into various shapes, such as spherical forms and expanded graphite. These shape variations endow graphite with enhanced performance characteristics, making it better suited to meet specific and specialized needs.
With the ongoing improvements in graphite processing and applications as described above, it is expected that the mutual utilization between synthetic graphite and natural graphite will further intensify in the future. The production of spherical flake graphite (SFG) involves transforming mineral flake graphite into a spherical shape. Given the strong anisotropy of natural graphite crystals, their properties tend to shift from one direction to another. Processing techniques must be tailored to either favor the crystal edges based on the characteristics of the crystal basal plane relevant to the intended application, or vice versa. Of particular importance is the application in energy storage, such as in lithium-ion batteries, where graphite serves as an anode material.
The production method for SFG has been fully established, and employing mining operations can enhance the product’s value. However, improper handling may result in the destruction of 30% to 70% of the flake-scale material, leaving behind low-value, small-sized fragments. Thus, it is certain that a significant loss rate can be expected. The production of expanded graphite or exfoliated graphite involves chemically treating the graphite to force the graphite flakes to separate, thereby increasing their quantity and giving them an accordion-like structure. In the case of expanded graphite, it is often rolled into a flat shape or processed through other mechanisms to prepare it for use.
Graphite is experiencing the strongest demand growth in the fuel cell, lithium-ion, and other battery sectors, as well as in the photovoltaic solar cell industry. This industry is still in a phase of rapid development, and accordingly, its raw materials and composite materials are also highly diversified. According to research by Guolian Securities, graphite is extensively used in the anodes of lithium-ion batteries. Given various cathode and anode compounds and energy requirements, a lightweight vehicle battery will consume more than 20 times the amount of graphite needed for lithium metal—or at least 5 to 10 times as much.
Currently, many manufacturers are researching and developing experimental graphite-silicate polymers, various spherical graphite blends, cleaning agents, and other materials. It is expected that in the coming years, as standards are adopted, fuel cell technology advances, and demand for electric, hybrid, and plug-in vehicles grows, graphite’s parameters in industries such as batteries and energy storage will experience significant fluctuations.
In the early days of the nuclear power industry, graphite—being one of the primary components of reactors—was used as a moderator in nuclear control rods. For this specific application, high-purity graphite is required; therefore, synthetic graphite has become the material of choice. Fourth-generation nuclear reactors, such as pebble-bed reactors, are expected to utilize both synthetic and natural graphite. The reactor fuel consists of uranium oxide pellets encased within spherical graphite particles coated with synthetic graphite, which are fabricated from both natural and synthetic graphite matrices. The exact ratio is difficult to estimate, as only demonstration reactors are currently under development in China. Industry estimates suggest that between 25% and 75% of the graphite used will be natural graphite, with the remainder being synthetic graphite. It is estimated that after the initial demonstration pebble-bed modular high-temperature gas-cooled reactor (HTR-PM) in China becomes operational, the total amount of natural graphite could reach up to 200 tons. Furthermore, an additional 40 to 70 tons of natural graphite will be required each time the fuel pebbles are replaced.
The additional demand is driven by single-layer graphene—the thinnest form of graphite, consisting of a single-atom-thick layer of carbon arranged in a honeycomb lattice when multiple graphene flakes are stacked together. It was first synthesized in laboratories nearly ten years ago. Since then, research on this material has become a hot topic both in university settings and in private labs.
Graphite’s unique set of properties suggests its potential for a wide range of applications—for instance, transistors, highly sensitive sensors, transparent conductive films for touchscreens, more efficient solar cells, and electrodes used in energy-storage devices. Moreover, IBM has already developed a simple graphene-based integrated circuit system. Meanwhile, Samsung has also demonstrated flexible graphene displays, presumably also based on graphite. What affects all these applications and poses one of the major obstacles is the lack of economic feasibility in the large-scale production of graphene.

III. The rise of electric vehicles provides significant potential for the graphite market.
In the past two years, the international graphite market has reached a turning point, and the current market atmosphere is particularly encouraging. The primary reason is the rapid growth of electric vehicles, which is set to make the graphite market highly promising. According to information provided by Simon Mores, Managing Director of Industrial Minerals Data, U.S. electric vehicle manufacturer Tesla plans to invest 5 billion U.S. dollars in building a lithium-ion battery plant in the southwestern United States. As a result, demand for natural graphite is expected to increase by 37% by 2020.
Graphite is used as an anode material in lithium-ion batteries, including those found in mobile phones. Each electric vehicle contains approximately 50 kilograms of graphite—far more than the amount used in a typical phone. According to analysts' estimates, if Tesla's project progresses smoothly, the market value of rechargeable lithium batteries could double over the next six years, rising from its current level of roughly 11 billion U.S. dollars. Moreover, some observers note that following Tesla’s announcement, stock prices of graphite companies have risen—and even earlier than their own forecasts had predicted.
However, some brokers remain cautious about just how high electric vehicles’ demand will soar and about the extent to which lithium-ion batteries will rely on graphite. Meanwhile, reports indicate that Tesla plans to use synthetic graphite made from petroleum coke—a material that is more expensive to produce. Some industry insiders also point out that currently, hybrid and pure electric vehicles account for less than 1% of the global vehicle market. At the same time, Susanna Shaw, a senior analyst at Roskill Global Commodities, a commodity market consulting firm, believes that the graphite market will advance slowly in the future. She predicts that the largest markets for natural flake graphite will continue to be refractory materials, while synthetic graphite will primarily be used for electrodes. Currently, the annual growth rate of flake graphite consumption stands at around 4-5%, whereas the annual growth rate for synthetic graphite is approximately 2-3%. By 2016, the battery industry is forecast to become one of the fastest-growing segments in the graphite market.
As the global economy gradually recovers—especially with the accelerating recovery of the U.S. economy—the demand and prices in the international graphite market have continued to improve. In particular, after European market standard prices rose to US$1,350 per ton over the past two to three years, they further climbed to over US$2,500 in 2014. It is estimated that prices will continue to rise in the future, primarily due to environmental concerns, resource conservation efforts, and the drive to enhance efficiency, which have led to the large-scale closure of some production capacities in China. Undoubtedly, the market will face severe supply challenges, especially for higher-quality graphite products.
According to the U.S. Geological Survey (USGS), in 2013, the use of natural graphite by major demand sectors declined somewhat. These sectors include primarily refractory materials applications, the steel industry, brake linings, the foundry industry, the battery industry, and lubricants. Together, these sectors accounted for approximately 70% of total natural graphite consumption. China’s production volume accounts for about 75% of global output. The USGS believes that the rapid development of large-scale fuel cell applications will inevitably lead to greater graphite usage in this sector compared to other sectors.
Additionally, according to a disclosure by the University of Manchester, analysts recently announced that a new type of graphene exhibits superior electrical and thermal conductivity compared to any material discovered to date. However, graphene is still in the research and development stage and continues to be plagued by technical challenges.
 
IV. Global Graphite Reserves and Production Status
It is estimated that global graphite reserves currently stand at 76 million tons. Of this total, China accounts for over 70%, followed by India and Mexico, which hold 14% and 4%, respectively. Forecasts suggest that as exploration and development continue in the coming years, graphite reserves are expected to keep increasing. In terms of global graphite production, China also accounts for over 60%, while India contributes 12%. Other major producers include Brazil, North Korea, Canada, Sri Lanka, Mexico, as well as several countries in Europe and Africa.
Statistical data show that, at the current stage, among the global total production of 1.3 million tons, China accounts for 800,000 tons; followed by India with 140,000 tons; Brazil with 76,000 tons; North Korea with 30,000 tons; Canada with 25,000 tons; Romania with 20,000 tons; Sri Lanka with 8,000 tons; Mexico with 7,000 tons; Ukraine with 6,000 tons; Madagascar with 5,000 tons; Norway with 2,000 tons; and all other countries worldwide combined accounting for 185,000 tons, among others.
Like other metals, China has controlled the production and international market for flake graphite and amorphous graphite since the early 1990s. Given China’s abundant graphite reserves, despite continued control over production in the future, output volumes will remain substantial, and China will continue to be one of the world’s leading graphite-producing countries. In addition to imposing a 20% export tax and a 17% value-added tax, China will further tighten its grip on production and safeguard graphite resources by implementing newly integrated regulations governing graphite mining operations. As overall market supply tightens and demand continues to rise, this is driving sustained increases in international graphite prices.
In North America, Canada holds tremendous potential for future development of graphite supply. Currently, Canada has already become a major producer; as construction on several existing mines nears completion and a significant amount of infrastructure is set to be finalized, it is estimated that numerous projects will be completed and enter production in the coming years. Although the United States has not produced graphite for nearly 20 years, several key projects have been placed on the agenda since 2010—particularly an active development project currently underway in Alaska. Mexico boasts relatively abundant graphite reserves. With the increase in technical expertise and infrastructure, the country is expected to see a substantial rise in its amorphous graphite production in the future. In South America, especially Brazil, resources are plentiful; as infrastructure continues to improve, production is also expected to grow steadily in the years ahead.
Europe has a history of over 500 years in the commercial production of amorphous graphite, flake graphite, and crystalline graphite. If market prices can remain at their current high levels, production is still poised for further growth. Currently, Europe continues to operate numerous active and promising graphite deposits located in countries including Norway, Ukraine, Austria, Germany, Romania, the Czech Republic, Sweden, and Turkey. Not only are existing old mines still being processed or reactivated, but development of new mining projects is also making positive progress. It is estimated that higher prices and supply risks will drive robust growth in Europe’s future graphite production.
Australia has historically produced graphite, but in 1993, major flake graphite mines were closed due to declining prices. However, the country has since resumed exploration and development of graphite deposits, and production is now on the rise. As a result, in the coming years, Australia will possess all the necessary factors to become a major producer of flake graphite.
In contrast, Africa is currently a small-scale producer of graphite worldwide, with only two major countries—Madagascar and Zimbabwe—engaged in modest production. Previously, Africa was one of the world’s leading graphite-producing regions; however, due to persistently low prices, many mines were shut down. In particular, graphite deposits in this region are hampered by underdeveloped infrastructure, high energy costs, and significant geopolitical and legal risks. Nevertheless, Africa boasts world-renowned deposits of high-purity, large-flake graphite. With current prices continuing to rebound, these deposits provide strong support for the future development of the graphite industry.
It has been confirmed that several African countries—such as Mozambique, South Africa, Uganda, Angola, Tanzania, Ethiopia, and Namibia—possess abundant graphite deposits. Notably, some mining companies and producers are actively working to secure ownership of these mineral resources. Although Africa boasts enormous potential for graphite production, given the high risks associated with development and production, it is essential to obtain ownership of both the deposits and their specific locations. Furthermore, companies seeking to begin producing industrial-grade graphite must demonstrate genuine legal qualifications and compliance.
From 1994 to the first decade of this century, global graphite production remained steadily at a level supported by robust demand. In other words, since market consumption began to rebound, the annual growth rate has consistently stayed between 4% and 6%. During this period, in addition to the growing demand from the BRICS countries, high-tech applications in developed nations also contributed significantly to the increase in demand. Moreover, during this time, the international market supply did not show any substantial oversupply. According to basic linear regression analysis conducted by Guolian Securities, the estimated growth rate for graphite demand is approximately 2.5%. It is projected that Canada, Europe, Brazil, Australia, Africa, and Mexico will emerge as major graphite-producing countries and regions, with their respective annual production volumes ranging from 15,000 to 20,000 tons.
Graphite veins from Sri Lanka are distinctive and have secured a place in the market. These veins range in width from a few centimeters to several meters. The veins boast exceptionally high purity, with a carbon content exceeding 95%, meaning they require virtually no further purification. However, the country’s production capacity struggles to meet the demand for a consistent and reliable supply—especially given the rapid growth in demand from the lithium-ion battery industry. In recent years, Sri Lanka has once again begun independently exploring and developing graphite deposits. Moreover, companies from other countries and regions around the world are also actively pursuing exploration and development of graphite mines.
 
V. Major Western Graphite Producers
In Western countries, there are only a few major graphite producers. Among them, the largest is the Brazilian private company National Graphite, with an annual production capacity of 70,000 tons. Other producers include the private firm Timcal Graphite & Carbon, which has seven plants worldwide and employs 450 people. Additionally, Eagle Graphite is another private company that operates in Canada and has plant facilities in British Columbia. The Norwegian company Skaland Graphite specializes in the production of crystalline flake graphite. Its deposit, located along the southwestern coast of Tromsø in western Norway, has a carbon content of 31% and ranks among the world’s richest flake graphite deposits. Reserves have been confirmed at 1.8 million tons, and current annual production stands at approximately 10,000 tons. Meanwhile, publicly listed graphite development companies include the Moto Graphite project in southern Madagascar, developed by Jinkang Resources, as well as the Chassé-Creek deposit in eastern Ontario, Canada, which is wholly owned by Northern Graphite.
What has attracted the most attention from industry insiders is Sierra Resources, a developer listed in Australia, whose Barama graphite project—located in Mozambique and currently under exploration and development—obtained an extraction license in 2013. In particular, the company’s stock price has recently surged, primarily due to a memorandum of understanding signed with a subsidiary of China Aluminum Corporation for the off-take of 80,000 to 100,000 tons of graphite and vanadium annually. Indeed, since entering the Mozambique project in 2011, Sierra’s market capitalization has skyrocketed, reaching A$10 million—or roughly US$9.29 million—at that time. Twenty-three percent of the company’s equity is held by its directors, and today these shares are worth over A$460 million. All of this value appreciation can be attributed to the discovery of the Barama graphite deposit and the ongoing development of the project. It is projected that the project will begin production between late 2015 and early 2016.
Stratmin Global Resources, a large-flake graphite producer and developer listed solely on the London Stock Exchange, is currently focusing its operations on the Rohalano mine project located in Madagascar. Manori Yanafas, the company’s managing director, told the British magazine Mining Journal that the company had taken over from China following the latter’s unsuccessful management of the Rohalano plant; however, technical and process-related challenges are now gradually being resolved. Recently, Stratmin increased its expenditures by £2.5 million (equivalent to $4.14 million) to enhance current operations and build a second, more modern plant. In 2014, the company’s monthly production reached 350 tons, and it plans to ramp up production to 1,000 tons per month by 2015.
It was pointed out that the company’s business model is quite stable. The company uses JCB equipment to excavate and mine ore, then transports the ore to a plant located more than 250 yards away. There, a hydroelectric power plant provides the necessary electricity; the ore is washed and mixed with water, slightly stirred in the plant, subjected to flotation, dried, and finally loaded onto ships. The company expects to turn a profit in 2015. The company’s authorized capital amounts to nearly £7 million.
 
VI. Global Graphite Development Trends
The last large-scale exploration and development of graphite deposits took place in the 1990s. However, since then, some of the best deposits have been acquired and operated by major graphite producers—such as France’s IMER Non-Metallic Mining Group or state-owned enterprises like GK Graphite. Meanwhile, smaller deposits have been abandoned, and some mines have even been mothballed. According to Guolian Securities, in the near term, small- and medium-sized mining companies are unlikely to invest in the exploration and development of graphite deposits; only the large mining enterprises will be poised to tap into the best-performing deposits once the demand cycle begins to pick up.
Moreover, the projects developed primarily focus on vertically integrated deposits, aimed at enhancing graphite grade and building a skilled and experienced management team to bolster competitiveness. As for other projects, they include potential large-scale downstream producers acquired by entities such as IMERS and GK—such as LinkedIn Graphite and Esboire Carbon—which are resuming mining operations and undertaking exploration and development activities.
Ultimately, the injection of supply from graphite producers in China and India is expected to ensure adequate market supply beyond these two countries. According to Guolian Securities, as of recently, a total of 36 state-owned development companies have indicated plans to pursue graphite projects. As for the number of development projects, privately owned enterprises have now increased their involvement to as many as 12 per month. Recently, the distribution of these projects has expanded to encompass 98 sites across North and South America, Africa, Europe, and Australia. However, among this substantial increase in projects, most will inevitably turn out to be low-grade ventures that fail to reach the stage of full-scale development.

Author: Wu Haiying, China National Materials Group Corporation Chamber of Commerce for Import and Export of Metals and Chemicals