The Pricing of Natural Graphite and the history of natural graphite

In the 4th millennium B.C., during the Neolithic Age in southeastern Europe, the Mariţa culture used graphite in a ceramic paint for decorating pottery.

Some time before 1565 (some sources say as early as 1500), an enormous deposit of graphite was discovered on the approach to Grey Knotts from the hamlet of Seathwaite in Borrowdale parish, Cumbria, England, which the locals found very useful for marking sheep.

During the reign of Elizabeth I (1533–1603),  Borrowdale graphite was used as a refractory material to line moulds for cannonballs, resulting in rounder, smoother balls that could be fired farther, contributing to the strength of the English navy. This particular deposit of graphite was extremely pure and soft, and could easily be cut into sticks.  Because of its military importance, this unique mine and its production were strictly controlled by the Crown.

The Pricing of Natural Graphite

Graphite prices are a function of 2 factors – flake size and purity – with large flake (+80 mesh), high Carbon (+94%) varieties commanding premium pricing.

Graphite Prices

There is a posted price for Graphite which provides a guideline with respect to longer term trends but transactions are largely based on direct negotiations between the buyer and seller. Prices exceeded USD$1,300/t in the late 80s but crashed to USD$600 -$750/t in the 90s as Chinese producers dumped product on the market. During this period there was essentially no exploration and as a result there are very few projects under development.

Graphite prices started to recover in 2005 and with average growt rates of 5% per annum over the past decade. They are currently well over USD$1,300/t with premium product rumoured to be selling at up to USD$3,000/t as the supply of large flake, high carbon graphite is tightening. Price appreciation is largely a function of the commodity super cycle and the industrialization of emerging economies as new, high growth applications such as Li-ion batteries are only beginning to have an impact on demand and consumption. Graphite prices have not yet experienced the price appreciation of other commodities and graphite must still be considered an overlooked and undervalued commodity in the context of the current super cycle.

Future Growth

New applications such as lithium-ion batteries, fuel cells and nuclear power have the potential to create significant, incremental demand growth in the future. For example, it takes 20 to 30 times more graphite than lithium to make lithium-ion batteries. The use of lithium-ion batteries is growing rapidly in consumer electronics, and they are now becoming popular in power tools and motor scooters, and growth will continue with the increased use of hybrid and fully electric vehicles. Each hybrid electric car uses about 22 pounds of graphite, while a fully electric auto uses about 110 pounds.

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