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China's graphite market is not far from the downturn
**Abstract**
As a vital strategic resource, graphite has been drawing increasing attention. From the active calls from industry associations to the recent release of the “Graphite Industry Access Conditions†at the national level, the graphite sector is now facing new opportunities for standardized and sustainable development. This opportunity is like a timely rain for the graphite market and industry, which are currently experiencing a downturn.
**The problem has been around for a long time**
According to Liu Ronghua, a graphite industry and investment researcher, the current graphite market is in a slump. Over 90% of enterprises have halted production, with both production and prices declining, and exports also falling. At an event held in Beijing in early December, he participated in the first “China Graphite Industry Development Seminar and the 2012 Graphite Special Committee Annual Meeting.â€
Data from the Graphite Special Committee of the China Non-Metallic Mining Industry Association shows that by the end of October 2012, natural flake graphite production reached over 400,000 tons—more than 50% lower than the 930,000 tons produced in the same period the previous year. Exports dropped by over 30% year-on-year. Many companies reported difficulty in production, falling prices, reduced customer demand, and limited operations based on orders.
Han Yufeng, president of the Heilongjiang Graphite Industry Association, noted that inventory levels are rising, operational efficiency is dropping, and the market is becoming increasingly chaotic.
Industry media attributed the price decline to global and domestic economic conditions. On one hand, new graphite producers in other countries are increasing output and exports, competing with Chinese graphite. On the other hand, slowing domestic economic growth has reduced demand from industries such as steel and automobiles.
While the downturn is linked to broader economic challenges, many in the industry believe internal issues are more significant. Liu Ronghua pointed out that oversupply due to overcapacity is the main issue, especially when demand is weak.
The graphite industry has long suffered from overcapacity, with rapid expansion leading to disorderly mining, competition, waste, and environmental damage. Companies have engaged in price wars, selling at low prices and disrupting market order.
A senior executive from a large graphite company said that operating difficulties include challenges in deep processing projects and unstable profits. They emphasized the need for industry standards to better allocate resources and ensure stable operations.
At the end of November, the Ministry of Industry and Information Technology released the long-awaited “Graphite Industry Access Conditions,†setting requirements for production scale, layout, energy use, water consumption, product quality, and environmental protection.
These conditions aim to control new capacity, optimize existing facilities, promote mergers, and improve industry concentration. Projects must follow the principle of equal or reduced replacement, linking to the elimination of outdated production capacity.
China is the world's largest producer and reserve holder of graphite, with 64 million tons of proven reserves, accounting for 74% of the global total. In 2010, China produced 600,000 tons of graphite, making up 64.9% of the global output.
With the rise of new energy and materials industries, graphite has become essential in defense, aerospace, and advanced materials. Countries like the U.S. and EU have classified graphite as a strategic resource and imposed strict controls.
The new access conditions are expected to bring positive changes, eliminating outdated production and promoting standardization. This will help stabilize the market and support healthy, orderly development.
**The outlook is still broad**
Zhi Zhixiang, former Secretary General of the China Graphite Industry Association, noted that while the current off-season has hit the industry, production is expected to resume in January. If economic conditions improve, prices may gradually recover.
With the implementation of the access conditions, high inventory levels and market chaos should ease. The graphite industry still holds great potential, with emerging fields driving future growth.
Liu Ronghua highlighted that traditional applications remain important, but new areas such as spherical graphite, flexible graphite, and nuclear graphite are becoming key drivers. Demand is shifting toward specialized, high-performance products.
Graphite is also gaining traction in green energy, automotive, and defense sectors. With growing demand for lithium batteries and electric vehicles, the market is set for expansion.
Despite challenges, the industry remains optimistic. Liu Ronghua emphasized that the value of deep processing has not yet been fully realized. While many companies plan to invest in advanced products, few have made substantial commitments.
For graphite firms, this is a time to strengthen their core competencies, optimize product structures, and move towards higher-value processing. With industry access measures and environmental protection, the market will become more competitive and sustainable.
Industry insiders believe the graphite market will soon recover, driven by policy support, technological progress, and growing demand. The future looks promising for a sector with vast untapped potential.