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Graphite market trends: Supply chain diversification spurs new pricing dynamics

Downstream market players are accelerating efforts to diversify raw material supplies outside of China, prompting the graphite market’s supply chain to adapt to new pricing trends reflective of the ex-China market. With China producing about 70% of global natural flake graphite and almost all spherical graphite for lithium-ion battery anodes, incentive policies like the Inflation Reduction Act (IRA) and recent Chinese export regulations have driven this shift.

“Downstream players are looking to geographically diversify their sourced material away from China, seeking government incentives under the IRA, and benefits from localization such as greater security of supply, reduced shipping times, and emissions,” said Tony Alderson, graphite analyst at Benchmark.

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China’s graphite export regulations, implemented on December 1, 2023, have spurred derisking trends rather than significantly impacting prices. This has prompted Benchmark to introduce new pricing metrics, including a -100 mesh, 94-95% carbon, CIF North America price. As the demand for ex-China supply developments rises, this new grade aims to provide graphite market players with region-specific price indexes to manage price risk effectively.

“Increasingly, ex-China graphite players are looking to settle supply contracts against price indexes that are not linked to transactions in the China market, to ensure the price is reflective of dynamics in North America,” said Daisy Jennings-Gray, Head of Prices at Benchmark.

North America, a vital region for the lithium-ion battery supply chain, is experiencing increased investments, evident in new anode capacity and graphite mining operations. The establishment of regional prices aims to bring transparency to an otherwise opaque market.

The flake graphite market is anticipated to enter a deficit in 2025, followed by a surplus between 2026 and 2028, and a persistent deficit from 2029, according to Benchmark’s Natural Graphite Forecast. With increasing global demand for anode capacity, efforts to challenge China’s market leadership and foster competitiveness outside China are expected to intensify.

Chinese export regulations, requiring licences for exporting graphite products, have had limited effects on prices so far. However, concerns about permits and the potential for longer-term restrictions could impact overseas companies’ access to Chinese graphite. The situation is dynamic, with licences already granted for South Korean buyers, and expectations of further approvals for the US, India, and Japan by the end of February at the earliest.

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