Top global graphite miner Syrah to lower production from Balama mine on weak demand

Syrah Resources -- the world's largest graphite miner -- aims to lower production from its Balama graphite mine in Mozambique until demand conditions improve and sales orders at competitive prices warrant higher capacity utilization, it said in an interim report April 27.

Graphite is a critical component used in manufacturing batteries for electric vehicles.

Applying some brakes on production is mostly led by volatile anode market in China and elevated inventories, according to the miner.

During the time, Syrah will streamline its operations, put forward planned maintenance and focus on cutting costs, the miner said.

The miner will also assess the potential for more dynamic Balama operating plans at reduced capacity utilization, to be in line with variable client demand and lower sales orders.

While the miner's natural graphite sales were unhindered due to decent container and breakbulk vessel availability for its Balama shipments from the Nacala and Pemba ports in Mozambique, unsteady sales orders have weighed on its sales growth, Syrah said.

The miner sold 30,000 mt of natural graphite in the first quarter of 2023. Fine product sales to Chinese anode clients were below expectations, with the quarter also witnessing higher unsold finished product inventories.

The miner said it is aiming to prioritize sales from stocks to deliver into commitments in the June 2023 quarter.

Graphite fines sales accounted for about 89% of overall product sales, with fines spot prices falling on the quarter on destocking of elevated Chinese battery cell and anode material inventory positions, the miner said.

Syrah attributed the fall in fines spot pricesto a slower pace of EV growth, and the impact of elevated battery cell production and anode material output, which outpaced EV demand growth through the latter part of 2022.

The miner said it witnessed low spot market liquidity in China for EVs during Q1.

Q1 world electric vehicle sales slowed to 32% from the year-ago quarter, to 2.7 million units, the miner's report showed.

Graphite production dips

Syrah said it produced 41,000 mt of graphite in Q1 2023, down 11% on the year and 17% down on the quarter.

The miner attributed the lower output to operational halt on finished product stock constraint and certain unforeseen processing issues.

The company reported Q1 weighted average natural graphite sales price at $636/mt CIF, impacted by a higher proportion of fines sales and reduced fines prices compared withQ4 2022.

Coarse flake and fines prices ex-China stayed robust on stable demand and ongoing supply disruptions on the Ukraine-Russia crisis and reduced Chinese supply, the miner noted.

New plant

Construction of a large-scale active anode materials plant is underway in Vidalia in the US, according to the miner.

The 11,250 mt/year new plant is set to be completed in Q2 2023, which is expected to be online in Q3 2023.

Most of the output from the US plant will be purchased under offtake by a tier 1 integrated battery producer and auto OEM, its data showed.