Chinese Natural Graphite Supply & Applications of Amorphous Graphite. Kelvin Hu. President, South Graphite Co., Ltd

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2 Chinese Natural Graphite Supply & Applications of Amorphous Graphite Kelvin Hu President, South Graphite Co., Ltd

3 Ⅰ Chinese Natural Graphite Supply Output, prices, market, resources, consolidation, trends of supply, government factor Ⅱ Application of Amorphous Graphite Current application, new studies, purification, potential applications, outlook for A.G

4 Ⅰ Chinese Natural Graphite Supply

5 Questions from Industry Minerals How was consolidation achieved in the amorphous market? Can consolidation be achieved in the Chinese flake graphite industry? What wider implications will this have for the industry as a whole? How has Chinese governmental policy changed due to environmental concerns? What does this mean for natural graphite exports?

6 Chinese Natural Graphite Supply Market Worldwide Output , the world s output quantity of natural graphite keeps a stable growth; The world total output expects to exceed 1.2million tons in 2014; There are difference gap between official statistical data and actual output in China. Unit : tons Data Source : USGS World s output of natural graphite

7 Chinese Natural Graphite Supply Market Prices , the world graphite price has been very unstable Unit : USD Flake Amorphous Prices for natural graphite Data Source : China Non-Metallic Materials Industry Association

8 Chinese Natural Graphite Supply Market Prices Steel Industry consumes nearly 60% the natural graphite(flake & Amorphous) in China; Annual Output of Carbon-contained refractory material is 2.5 million tons, which consumes more than 300,000 tons of flake graphite; High quality anthracite coal(low sulfur) is the main substitution for A.G during the steel manufacturing. ( Total : 56%) Flake Graphite Refractory 70% Steel Industry 80% ( Total : 56%) Graphite Amorphous Graphite Recarburizer & HEM as Briquette 60% Others 44% Others 40% Steel Industry 100% ( Total : 60%) Graphite used in steel industry

9 Chinese Natural Graphite Supply Market Price Analyze External factor (F.G & A.G) Chinese steel industry is in the position of serious depression, although the output wasn t declined, the steel price fallen by 30% compared its level in 2011; Chinese coal industry is in the same position, the price was falling by 40% compared its level in Internal factor (F.G) Lots of investment have been made into graphite industry, the increasing on production capacity was far more than the growth of demand; The data of production and sales can t fully indicate the balance in supply and demand, a number of unreleased production capacity is the internal driving force which lead the downwards on prices.

10 Chinese Natural Graphite Supply Supply Amorphous Graphite Resource South Graphite Amorphous Graphite in China

11 Chinese Natural Graphite Supply Supply Amorphous Graphite Chenzhou reserves 72.5% of A.G in China, the average fixed carbon is around 80%, the highest can be 92%, which made it so far the best quality of the world; The mining belt spreads in town Lutang, which is also the trade name for the products years back to 1960s, the sloe company was Hunan Lutang Graphite Mine ; In 1990s, the Company went bankrupt, Large number of private miner went into the exploitation; With the Golden Decade of Coal ( ) in China, the disordered exploitation went into madness, with the output up to 1.5 million tons of A.G.

12 Chinese Natural Graphite Supply Supply Amorphous Graphite Output of A.G in Chenzhou Unit: thousand tons Data Source : Chenzhou Statistics

13 Chinese Natural Graphite Supply Supply Amorphous Graphite The madness illegal exploitation disregards the environment, even the safety of labor s life. Production safety accident happened a lot since 2002; In 2007, an extremely cold winter(ice damage) attack Chenzhou, power supply were cut down for more than one month, the production facility were ruined, the production stopped for months, the A.G price increased by 60%(from USD to USD per ton)

14 Chinese Natural Graphite Supply Supply Amorphous Graphite In 2009, mines closed by local government. In Nov, 2010, consolidation agreement signed between CNBM and Chenzhou Government.

15 Chinese Natural Graphite Supply Supply Amorphous Graphite 25 th Mar 2011, foundation of South Graphite Co., Ltd; S.G spent 2 billion RMB(320 million USD) to bought out all the resources from the original miners. South Graphite 2 Billions RMB Compenstation Government Resource Take back license Former owner

16 Chinese Natural Graphite Supply Supply Amorphous Graphite In 2012, the consolidation successfully achieved, South Graphite starts to re-plan & re-built the production system accordingly. Plans of production for South Graphite

17 Chinese Natural Graphite Supply Supply

18 Chinese Natural Graphite Supply Supply Trends of Supply on A.G South Graphite designed output capacity of output is 510,000 tons; Output outside South Graphite is around 80,000 tons in China; High quality products can only provided by South Graphite; South Graphite keen to balance the output, prices & market share; The Trends of supply on A.G will be stable according to the demand; The demand & Supply expects to increase as the recovery of Steel & Coal industry in China.

19 Chinese Natural Graphite Supply Supply Flake Graphite Resource Luobei Jixi Qingdao Existing Resource New Resource Xinghe Flake Graphite in China

20 Chinese Natural Graphite Supply Supply Flake Graphite Output The FC for graphite from Heilongjiang reaches 12%, which makes it the major supply base. Xinghe produces large flake graphite. Newly explored F.G constantly reported in the past two years The output capacity for F.G is around 1.2 million tons, The output in 2013 is 540,000 tons, 45% of the capacity. The output in the first half of 2014 is 180,000 tons. Data Source : China Non-Metallic Materials Industry Association

21 Chinese Natural Graphite Supply Supply Flake Graphite Consolidation Effectively consolidation can hardly happen in the near future. There were some attempt of consolidation on F.G in China, with no effectively result; Resources are rich and widely exist in China; Low level of entry to the industry raises the consolidation cost ; Local government generally put high expectations on graphite, and encourage the invest & development on its own territory; No leading company in the industry.

22 Chinese Natural Graphite Supply Supply Flake Graphite Trends of Supply F.G will remain excess on supply for a long time; New supply will continuously appear in China despite of depression; China will remain as the major supply of F.G in the world, unless richer resources have been explored outside China; The demand & Supply expects to increase as the recovery of Steel & Coal industry in China; The increase of demand on battery will not affect the supply & demand situation; The global buyers will enjoy low price for F.G for the near years.

23 Chinese Natural Graphite Supply Supply Flake Graphite Chinese Government Factor Transformation and upgrading is the mainstream and expectation for Chinese industry; The graphite industry is too much highly anticipated; There will be more subsidy funds for graphite industry from the government; Leading company of the industry expects to appear in the next three years; Environmental policy will knock out few small player, and won t affect much on the industry; The custom duty expects to reduce as the recognize back to rational.

24 Questions from Industry Minerals How was consolidation achieved in the amorphous market? Can consolidation be achieved in the Chinese flake graphite industry? What wider implications will this have for the industry as a whole? How has Chinese governmental policy changed due to environmental concerns? What does this mean for natural graphite exports?

25 Ⅱ Application of Amorphous Graphite

26 Application of Amorphous Graphite Status Traditional Views on A.G A.G cannot be upgraded beyond 85% Carbon for high purity uses; A.G is a form of low evolved graphite; The structural properties of A.G are not suitable for refractories or batteries; Research on A.G is far less than its on F.G; The application of A.G is in low end. Amorphous Flake

27 Application of Amorphous Graphite Status Recarburizer, Heat Enhancement Material A.G is widely used as recarbonizer and HEM in the steel industry, especially in Japan; Synthetic graphite, anthracite coal, petroleum coke, are the substitutions for A.G; The demand from steel industry is the key factor of instability for A.G; Some of the demand from Japan switch to anthracite due to the pressure on cost; Recarburizer Raw Material EAF Refining HEM Iron Ore Secondary Refining A.G used in steel manufacturing Converter

28 Application of Amorphous Graphite Status Carbon Rod for Dry Battery Annual demand quantity from Carbon rod is 50,000 tons; 85% of the demand stays in China; Dry Battery is commonly recognized as a sunset-industry; There is no competitive substitutions. Unit: 100 million pcs Output of carbon rod for dry battery

29 Application of Amorphous Graphite Status Foundry & Lubricant South Graphite supplies 40,000 tons of graphite powder to Foundry & Lubricant in 2014; Most of the demand are low-grade.

30 Application of Amorphous Graphite Development Development on A.G South Graphite has been working with Universities, Equipment Manufactures, Potential End users to develop possible applications for A.G; Finding the competitive advantage for A.G, either better performance or lower cost, is the key factor of prospects.

31 Application of Amorphous Graphite Development Development Partners

32 Application of Amorphous Graphite Development Development on A.G Purification is the precondition of further application. Flotation to FC90-95% proved to be successful; The cost for FC90% is competitive with F.G; South Graphite expects to supply FC90-95% products to the market; Continuous-High-Temperature Purification is the way to reduce the cost for high-grade product. Low Carbon FC70%-FC80% Floatation Medium Carbon FC90%-FC95% C-H-T High Carbon FC99%

33 Application of Amorphous Graphite Development Purification Flotation: Improve the milling process and proper foaming agent; Plantation about to start construction, expect to supply FC90% above A.G by the end of Raw Material Milling Flotation Raw Material Ball-Milling Flotation Stirred Mill Flotation Stirred Mill Flotation Powder FC90% Competitive Advantage Cost 20% lower than F.G on the same grade.

34 Application of Amorphous Graphite Development Purification High Temperature Purification Equipment is still debugging for industrial mass production; Low power consumption. FC In FC Out P/P P.C/Ton 90% 99% 3.5h 4176kwh 99% 99.9% 4.3h 5208kwh 99.9% % 5.2h 6250kwh

35 Application of Amorphous Graphite Application Refractory FC90% A.G performs not as good as F.G; The Proper way is to mix A.G & F.G in composite; The composite will basically keep the performance while the cost would be lower. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Amorphous Composite Flake 25% 20% 15% 10% 5% 0% Amorphous Composite Flake Anti-oxidation Thermal shock resistance A.G performance on MgO-C Experiment

36 Application of Amorphous Graphite Application Refractory The trend for carbon-contained refractory material is to lower its carbon content, which requires it in small particle sizes, favors A.G. Amorphous Composite Flake Pics of A.G performance on MgO-C Experiment Competitive Advantage Cost 20% lower than F.G on the same grade.

37 Application of Amorphous Graphite Application Route for South Graphite Trial production with some partners, expects to widely used in 2015; Refractory manufactures showed great interests in it. The introduction of A.G expects to bring the cost down by 2%.

38 Application of Amorphous Graphite Application Li-ion Battery Anode Material The granular size of A.G makes it easier to shape with lower loss. A.G performs better rate capacity compared with F.G, which allows the charge-discharge rate performance better ; Theoretically aspect, A.G will have better potential in E.V;

39 Application of Amorphous Graphite Application Li-ion Battery Anode Material Industrial test is successfully conducted by TsingHua University & South Graphite; South Graphite plans to invest on it in Competitive Advantage Cost lower than F.G & S.G; Better charge & discharge rate.

40 Application of Amorphous Graphite Application Isostatic Graphite Isostatic Graphite is normally recognized as natural-graphite-not-related material; Isostatic Graphite is the key material for some high-end equipment manufacturing; Military- industry requires better quality isostatic graphite; The Chinese government put it in the strategy material list ; The small granule size of A.G suitable for isotropy; The cost will be lower than synthetic graphite.

41 Application of Amorphous Graphite Application Isostatic Graphite Index for I.G made from A.G Technical parameters Technical index Density ( g/cm³ ) 1.78 Shore D 51 Flexure strength (Mpa) 39.2 Compressive strength (Mpa) 78.4 Elasticity modulus (Gpa) 9.8 Resistivity (μω.m) 11 Thermal conductivity (W/mk) 116 Expansion coefficient (10-6 /K) ( ) 4.5 Impurity (ppm) 50 Competitive Advantage Cost lower than S.G; Good performance.

42 Application of Amorphous Graphite Conclusion Conclusion The lack of study on A.G makes it negatively judged; More & more scientists in China studies on A.G, which will lead to further break through on it; A.G shows spacious of potential uses in many fields; The on-going invest on A.G will be more rational than F.G, which allows the industry healthy in China; A.G might be a big threaten for F.G in terms of the uses on E.V; Isostatic graphite is the next high-end use for A.G; South Graphite will keep on develop and invest the applications on A.G.

43 Q & A