Australian miner Syrah will reduce its monthly output of graphite in the fourth quarter of 2019 by about two-thirds compared with the third quarter, because of the current unfavorable market conditions.
Australian graphite producer Syrah Resources has significantly cut the output target for flake graphite from its graphite mine in Mozambique to 5,000 tonnes per month for the fourth quarter of 2019, the company said on Tuesday September 10.
In comparison, the company still plans to produce and sell 45,000 tpm in the third quarter.
The decision was based on the falling prices for flake graphite in a well-supplied market in China and on the depreciation of the yuan, the company said.
Syrah’s weighted average selling price for the third quarter of 2019 has unexpectedly fallen to around $400 per tonne, compared with $457 per tonne in the second quarter, the company said.
Syrah mainly provides small flake graphite to lithium-ion battery anode producers in China.
Fastmarkets assessed the price of graphite flake, 94% C, -100 mesh, fob China (-194), at $540 per tonne on September 5, unchanged since August 22.
Syrah has ramped up its output since it went into commercial production at the start of this year. This additional material has weighed on prices in the flake market.
A sharp fall in Syrah’s production will have an effect on prices, market participants said.
"Prices may not increase [just yet], but they will not go down any further [after that production cut]," Puruvi Poddah, group manager at Tirupati Graphite, said at Fastmarkets’ Graphite 2019 conference in Berlin, which runs September 10-11.
The decline in prices was driven by a Chinese customer-led price adjustment for tonnages shipped in the current quarter, in response to exchange-rate fluctuations and a market imbalance, the company said.
Extra production from Madagascar and a seasonal resumption of output from Northern Chinese graphite miners added to the amount of material in a well-supplied market and resulted in an unfavorable outlook for the flake graphite market in the fourth quarter, it added.
Refineries in the graphite industrial park in Luobei in north-eastern China, which borders Russia, typically operate for only a few months each year due to the region’s extreme weather conditions. Those refiners restarted their graphite flake production in September.
There was further pressure on prices from the sharp depreciation already seen in the Chinese yuan and concerns over further declines, which were affecting negotiations with Chinese customers on prices denominated in US dollars, the company said.
The value of the yuan against the dollar has remained above 7 yuan to $1 since August 5, amid intensifying trade tensions between China and the United States. At the time of publication on September 10, the exchange rate was 7.1210 yuan to $1.
As a result, Syrah now expects graphite production to reach only 5,000 tpm in the fourth quarter of 2019. Its Balama facility in northern Mozambique achieved total output of 104,000 tonnes over the full year in 2018.
"In response to the sudden and material decrease in spot graphite prices, and the effect on price negotiations and contract renewals, we have taken immediate action to reduce our production volumes in [the fourth quarter of] 2019 to levels sufficient to maintain operations and continue our production optimisation activities," Shaun Verner, Syrah’s managing director and chief executive officer, said.
Market sources expected the production cuts to bring some relief to a well-supplied market, but further rises in the price seemed to be limited by the muted demand from the downstream lithium-ion battery and refractory sectors.
In terms of demand, the refractory sector has cut production in response to the environmental inspections undertaken in China since the beginning of this year.
Furthermore, Syrah said, the cuts in China’s subsidies for electric vehicle usage, which took effect at the end of June, created another headwind to the outlook for graphite demand in the near term.
