Project shi mo a study of the global graphite market to 2024

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


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?


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


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


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


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


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


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


We present our facts in clear to digest formats


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


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


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


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.

mailto:[email protected]

mailto:[email protected]

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Project shi mo a study of the global graphite market to 2024

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