Syrah Resources halts production activities due to COVID-19 as China’s graphite supply recovers at a slow pace

In a drastic measure to contain the spread of COVID-19, Mozambique-based Syrah Resources had to suspend production activities at its Balama Graphite site from March 28, till restrictions in the country are lifted. The production activities in China, meanwhile, have begun to recover through March after extreme limitations in place for the most of February.

 

The Chinese supply had initially been disrupted in early February owing to the Chinese New Year celebrations. However, restrictions were enforced for a much extended period in efforts to restrict the domestic movement of the virus. Some reports suggested that flake graphite operations in Qingdao, Shandong, started reopening in early February. However, the disorganization and upsetting of the supply chain in the area owing to self-isolation of the staff and rising shipping costs have resulted in considerable delay.

The operations in Syrah Resources have been abruptly halted given the domestic travel restrictions, with a significant absence of the majority of the workforce at its Balama Graphite project site hampering mining processes. The company has, however, assured that dispatch of the sales order from pre-existing product inventory would continue at a steady pace. Syrah Resources has also temporarily terminated activities at its battery materials plant in Louisiana, United States, currently under lockdown since March 23, 2020.

The disruption in supply dynamics has had a limited effect on the price, owing to the current low demand for graphite. The emergence of electric vehicles and new possibilities in portable power generation has driven the need for lithium-ion batteries and fuel cells, which in turn has resulted in a surge in demand for graphite production. However, a large part of 2019 and early 2020 witnessed a dip in demand as a direct consequence of substantial cuts to the EV incentives in China. The market scenario is ripe for change, nevertheless owing to the announcement of the extension of EV purchase subsidies by the Chinese government, starting from June 2020.

The return to normalcy in terms of market demand for graphite would be triumphant in undermining any adverse effects from the environmental inspections been undertaken in China, which has already resulted in frequent closure of mining activities. The higher trend of demand might also lead to a definite spike in prices in the coming years, helping the domestic as well as global market to sustain any losses.

In the meantime, the market in China continues to probe for foreign sites of graphite supply, with the objective of reducing the domestic dependence on upstream resource production. Syrah Resources had become a significant graphite producer outside of China. However, the emergence of the COVID-19 virus has played the role of a disruptor in future forecasts. The company had nevertheless scaled back on production activities amid low expected recovery and price fulfillment.

The rising price trends and increase in raw material demand from the likes of China and Japan would be beneficial for several flake graphite projects operating on a global scale, with their development currently halted as a protective measure against the COVID-19 pandemic.

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