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: If natural-flake graphite is only 10% of the total market, would the other 90% be the synthetic graphite materials?
SR: The big application for synthetic graphite is graphite electrodes. There’s about a $5.5B market. Graphite electrodes are used in the steel industry and ferroalloy production. No natural-flake or natural-amorphous graphite is used at all for those applications. For electrodes, they prefer to start out with a needle petroleum coke, which comes out of the oil refineries as a byproduct of refining sweet crude oils that have a needle structure.
The next-biggest application is what we in the graphite industry call carbon fibers, but the sporting goods industry still calls it graphite. It is about a $4B market. In addition to sporting goods, this material is used in the aircraft industry, plastics, windmills for wind energy and, more recently, the automotive market.
TCMR: Of the companies that are seeking or have found graphite deposits that they’re in the process of developing, do you consider any to have particularly positive outlooks?
SR: Yes. I try to look at the deposits that will have a good cost structure and make a good quality product over the long-term—not necessarily which ones can get to the market the fastest. So I tend to look at the long-term basis when I’m looking for a supplier of natural-flake graphite or an investment opportunity.
One critical thing to look at is the quality of flake graphite a deposit can produce—I call it the footprint—through normal floatation or normal separation of the ore and the graphite. When we talk about footprint, we try to determine the particle size of the graphite ore, how much will be in coarse-flake graphite (which we call plus-50 mesh), in the medium flake (plus-80 mesh) and in the fine flake (minus-80 mesh). We also look at the purity level, again through normal floatation or separation. Will it be only 90% pure? Or can this producer achieve 94–96% purity?
TCMR: Does Asbury Carbons own chunks any of these public companies that we’ve discussed, or consider any of their deposits among your potential sources of supply?
SR: We don’t own any of them, not at present, but we do see them as potential supply sources.
TCMR: Do you see Asbury ever being in a position to acquire such an asset?
SR: Yes, that’s very much a possibility if they are not over valued or Asbury could become their exclusive sales & market distribution agent like we did with the Lac-des-Îles graphite mine in the past.
TCMR: Do you see the graphite space being an area where investors could anticipate continued growth over the next two, five or 10 years?
SR: I see growth, but not as fast as the promoters have written. I see hybrid vehicles being a big percentage of future car sales, but not the electric vehicles because they’re just too expensive. Unfortunately, the hybrids don’t use anywhere near the amount of graphite in their battery systems that the electric vehicle does. The volume of the anode material needed for smaller lithium-ion battery applications isn’t anywhere close to what’s needed in the automotive industry.
The key is just good people, and reinvesting in them and in the company. That’s what Asbury has done.