Asbury Carbons CEO Stephen Riddle, the fourth-generation Riddle to run the 118-year-old company that bills itself as "the world's carbon and graphite source," is delighted to see sources of natural graphite resurfacing outside of China now that the commodity's price justifies investment in exploration and production. However, in this exclusive interview with The Critical Metals Report, Riddle tells us he's not convinced the buzz about exploding demand is justified – in fact, he worries overzealous producers may tip the balance toward too much supply.
The Critical Metals Report: Your great-great grandfather founded your company in 1895. Tell us why graphite is important to manufacturing today.
Stephen Riddle: Graphite is thermally and electrically conductive; it's a very good lubricant, especially at high-temperatures, and each single graphene layer is very strong. That unique combination of these key properties makes it an excellent material in a variety of applications.
TCMR: How would you characterize the worldwide graphite market, both natural and synthetic?
SR: Generically, I'd estimate global graphite as a $13 billion (B) industry. Natural graphite, however, is a small portion of the overall market—no more than $1B. The major application of natural-flake graphite is the refractory industry. It uses at least 40%, if not more, of all the natural-flake graphite mined in the world to make refractory bricks for steel mills and high-temperature furnaces. Lithium-ion batteries, while the fastest-growing application, still account for a very small component of the industry. The traditional applications that have been out there for years are growing at a slow rate internationally, but the demand growth of more than 5% is coming from lithium-ion batteries. Current demand for natural-flake graphite accounts for maybe 500,000-600,000 tons (t) per year.
Natural flake, as well as synthetic graphite, are also used to make fuel cells, but the fuel cell market isn't going anywhere anytime soon. Natural graphite also has an application in pebble-bed nuclear reactors, but most of them can use only synthetic graphite. So while natural graphite has a future in the fuel sphere, proportionally it accounts for only about 20% of those applications. A lot of the growth applications are further down the line.
TCMR: Natural-flake graphite is the part of the graphite market that we've been hearing a lot of buzz about in terms of shortages. Do you see that part of the market expanding?
SR: We do. Over the last 22-years, the price of natural flake was so low that no new companies could justify mining it outside of China, India and Brazil, where low-cost production is concentrated. Elsewhere, mines either closed because of low prices or held on by a shoestring.
TCMR: What's driven up the price of natural-flake graphite?
SR: A surge in demand in the Q4/09 caught producers off guard. We'd just come out of the financial crisis, when everybody's business dropped off by about 35%. Then all of a sudden, Chinese demand increased in the lithium-ion battery market for making natural-graphite anode material, what we also refer to as spherical -flake graphite (SFG).
That surge in the Q4/09 came at a time of year when people are stockpiling the natural flake coming out Heilongjiang Province in China because those facilities close down for the winter. Under the circumstances, the miners or producers basically had the market in a position where everybody agreed to pay more for the natural-flake graphite because they needed it at that time. Capacity started to increase after the market steadied out in 2010. Now there's a bit of surplus of natural-flake graphite and prices have dropped some.
TCMR: Who are the major manufacturers of lithium-ion batteries?
SR: Production is concentrated in China. Chinese manufacturers are the most cost-effective by far because of the methods used to produce SFG. The process involves taking natural-flake graphite classification and milling the graphite, which then shapes the graphite particle. In that process, you lose about 50-60% of the graphite you start with. It's still good graphite, but it just doesn't shape well. Then you have to purify what remains. The Chinese use an acid purification process that's very low cost but not necessarily the most environmentally safe process. Finally, that graphite is sold mostly to other Asian countries, where it has to be coated. The Chinese recently started coating within China, so now its capacity in that area is growing tremendously.