2019-11-12
Nov. 12, 2019 - Syrah Resources has adopted a new, flexible approach to the flake graphite market following a dramatic year in which it began commercial production from its Balama facility in Mozambique and produced 137,000 tonnes in the first nine months.
The Australian miner then slashed its target
production for the fourth quarter of 2019 to 5,000 tonnes per month.
"Looking at 2020, we plan to be flexible and respond to the market,"
Joe Williams, marketing manager at Syrah Resources, said on Tuesday November 5.
"We are looking for inventories to reduce and the market to come back into
balance. We will match production once the market is back in balance."
Over 2019, the combination of softening demand and the arrival of new material
on the market has weakened the prices for flake graphite.
"In the short term, in combination with other mine developments, Balama is
larger and more productive than the market can currently absorb
sustainably," Williams said. "Additional supply has created an
imbalance and this is why we remain dynamic to the conditions in the
market."
In response to the sharp fall in the price, Syrah plans a new approach to the
market. Production will be in proportion to demand and will be ramped up once
prices have recovered – and it can be ramped up quickly in response to changes
in the market.
"It does not currently make sense to front-run demand at unsustainable
levels," Williams said. "This is a market in transition to global
integration and we continue to test the price against plant output and market
balance. Ultimately, this leads to a point where price is higher than production
cost for enough of the cost-curve to be incentivized to produce."
Williams conceded that the company had overestimated how much the industry
would increase in size in 2019. "The market has not grown as much as we
would have liked but the long-term fundamentals of the market are in place and
very strong," he said.
The company retains its full commitment to the Balama project, however.
"There is no better graphite asset or plant out there," Williams
said.
Despite the decision to scale back production, Syrah remains committed to the
business need to produce on a large scale to bring down unit costs.
"On a long-term basis, supplying to the lithium-ion industry, small
production volumes don’t make sense," Williams said. "However, in the
short term, we are making an investment to balance the market."
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