Carbon is the basis of all life on Earth. and of an enormous array of organic chemicals; such as hydrocarbons, and inorganic chemicals, such as carbon dioxide.

Carbon can also bond with itself to form graphite, coal and diamonds. Graphite is comprised of stacked two dimensional layers of carbon atoms known as graphene.

The bonds within the graphene layer are very strong but the bonds holding the layers together are weak. This allows the graphene layers to be easily pulled apart, as occurs when using a pencil.

History
Graphite was used as a surface finish on ceramics from as early as 750BC. Skipping forward a few years, a large graphite deposit was discovered in the early sixteenth century near Borrowdale, England. Legend has it that the locals’ sheep were getting black marks on their coats when in the vicinity of a large mass of black rock. When investigated it was found that sticks of graphite could be broken off and used for marking.

A little later, the most important use of Borrowdale graphite was to provide a refractory lining to the molds used to make cannonballs. This resulted in better formed cannon balls that flew further and truer.

Uses
Graphite is used in refractories, electric arc furnaces, steelmaking, construction materials, paints, motors, generators, electrical equipment, batteries and energy storage, lubricants, brake pads, gaskets, nuclear reactors, rubber, flame retardants, insulation, fibres and nanotubes.

Scribes in ancient Egypt, Greece and Rome used a stylus made of lead metal to write on papyrus. This is why today we call the graphite core of a pencil “the lead”.

Natural Graphite
There are three types of natural graphite: flake, amorphous and vein.

Flake graphite forms from either organic (such as algae) or inorganic (such as carbonate) carbon, after being subject to high pressure and high temperature over considerable time. Deposits of flake graphite are found worldwide.

Flake typically grades in purity from 80% to 95% carbon. The balance is “intercalated ash”, which itself has characteristics that may affect the value of the graphite. Aside from grade, flake size is the most important economic factor. It requires further chemical or thermal processing for many applications.

Amorphous graphite looks a little like coal but it is more dense, slippery and soft. It is not actually amorphous but microcrystalline. It is formed by the metamorphism of high grade coal – anthracite. The metamorphism, essentially an increase in pressure and temperature, converts the anthracite into microcrystalline graphite. It tends to be lower grade than other types, with a carbon range of 60% to 90%.

Vein graphite is only commercial mined in Sri Lanka. It is known to occur elsewhere around the world and the aforementioned Borrowdale graphite was of vein type. The deposition of vein graphite is not well understood but is assumed to have been deposited from a fluid phase of graphitic carbon. It is high grade, typically at least 90% carbon and can reach 99.5% graphite in situ.

Synthetic Graphite
While attempting to make diamonds, Edward Acheson made carborundum (silicon carbide, the second hardest material to diamond) by heating clay and carbon to very high temperatures. Acheson patented his discovery in 1893 and commenced commercial production. Carborundum was, and still is, critical for the mass production of precision metal parts.

With further experimentation Acheson discovered that by heating carborundum to around 4,150oC the silicon vaporises, leaving behind graphitic carbon. This was the first production of synthetic graphite.

Synthetic graphite is usually manufactured by variations of the Acheson process, but also by other methods such as magnetic induction or chemical vapour deposition. The process is chemically complex and varies depending upon the end product.

Synthetic graphite is made to a variety of specifications that suit the specific needs of the end user. Most synthetic graphite is used in electrodes (including batteries) and the manufacture of carbon fibres.

Lithium ion battery makers prefer synthetic graphite to natural for reasons of quality control and various technical advantages. Today up to 95% of graphite used in batteries is synthetic. Further, it can be produced anywhere in the world and is thus not subject to vagaries of supply and pricing.

Graphene
Graphene, the single layer of graphite, was first isolated by Professors Konstantin Novoselec and Andrew Geim at Manchester University in 2004. They won the Nobel Prize for physics in 2010 for “ground-breaking experiments regarding the two-dimensional material graphene”.

Graphene is commercially available in various forms. It is the thinnest material ever made. At a thickness of around 0.35 nanometres per layer, three million sheets would make a stack only 1 millimetre high. It is flexible, can be stretched, is extremely strong, almost invisible and conducts heat, light and electricity.

The list of potential future uses for graphene seems to grow daily. Typical areas of research include stiffer, stronger composites, high frequency transistors, low cost display screens, light transmission, storing hydrogen for use in fuel cells, medical diagnosis and ultra-capacitors that may replace lithium ion batteries.

I shall write further on graphene in the weeks ahead.

Production & Resources
Production of natural graphite amounted to around 1.2 million tonnes in 2014, of which about half was flake and half amorphous, with a very small amount of vein graphite out of Sri Lanka. Worldwide production of synthetic graphite was also around 1.0 million tonnes.

China has been the largest supplier for years. However its mines are depleting and the government is forcing closure of many for environmental reasons. Against this, previously closed mines in other countries are being opened and many new discoveries have been made. In fact there is a flotilla of small Canadian and Australian explorers that are intending to develop graphite mines.

Australian explorers/developers include (ASX Code): AXE, MNS, SVM, SYR, TLG, TON, VXL.

There is no shortage of graphite in the world. In January 2012 the United States Geological Survey reported world reserves of 77 million tonnes, mostly in China and India, and resources of 800 million tonnes of recoverable graphite.

Price
There are many different specifications for both natural and synthetic graphite and thus a huge range of prices. The prices presented below should be treated as indicative only. Dollars are USD.

Natural graphite prices, like many other commodities, have seen a dramatic increase in prices over the past 10 years. For example, large flake has gone from a price range of $500 to $750 per tonne in 2002 to $2,500 to $3,000 per tonne in 2014. Synthetic graphite prices cover a broad range up to around $20,000 per tonne.

Flake graphite ranges in price from $1,400 to $3,000 per tonne, with price primarily, but not only, depending upon carbon content and flake size. Where the flake has been subject to further thermal or chemical processing the price can range from $4,500 to $7,000 per tonne. Amorphous powder ranges in price from $600 to $800 per tonne.

There has been downward price pressure on flake in 2015, primarily because the Chinese are selling down stockpiles.

Conclusion

Stephen Riddle, CEO of Asbury Carbons, was interviewed on 29 May 2012 by The Critical Metals Report. He estimated that the world’s total graphite market was around $13 billion, of which natural graphite is only worth $1 billion. That’s a small natural graphite pie.

While there will undoubtedly be growth in demand for natural graphite in the years ahead, supply pressure looks imminent. Market entry is difficult, particularly for the high value end. For a new entrant to take 10% of the market (~100,000t) the product would have to be high quality and versatile.

On current trends, synthetic will take the lion’s share of growth in the lithium battery space. Nonetheless there is demand for very high quality flake. But for most potential producers, that means only a small part of total production may be saleable.

To invest in the sector look for the highest quality flake. And preferably, companies with robust offtake agreements.

02 September 2015 Commodities