Graphite Hits All-Time Low... Save Posco Future M Amid 'China's Low-Price Offensive'

Global Graphite Oversupply Due to Increased Production in China
Significant Drop in Battery Anode Material Prices
Domestic Sole Anode Material Company POSCO Future M Sees Price Gap Widen to 40-50%
Government to Discuss at Supply Chain Stabilization Committee

The price of graphite in China has plummeted, reaching an all-time low. The price of battery anode materials, which primarily use graphite as a raw material, has also fallen sharply, exacerbating the management difficulties of Posco Future M, the only domestic graphite anode material company. There are calls for active government support to stabilize the battery supply chain. The government plans to hold a Supply Chain Stabilization Committee meeting next week to discuss a basic plan for stabilizing the supply chain, including graphite.

According to the Korea Mining Industry Association's Korea Resource Information Service on the 11th, the price of graphite is currently $465 per ton. This is the lowest level since November 2018, as confirmed by statistics. The reason for the sharp drop in graphite prices is the significant increase in production in China, which accounts for 77% of global graphite production as of 2023.

On the other hand, demand for battery anode materials using graphite has slowed due to stagnation in electric vehicle growth. With supply exceeding demand, prices continue to plunge. In fact, the Korea Resource Information Service's supply-demand stabilization index shows graphite at 88.2, indicating an oversupply situation.

As graphite prices have fallen sharply, the price of graphite anode materials has also dropped significantly. According to the battery industry, Chinese anode material companies are offering prices in the high $2 per kilogram range to the battery industry. While graphite anode material prices were around $5 per kilogram last year, they fell to the $4 range in the first half of this year and have dropped below $3 in less than a year.

China is aggressively pursuing low prices due to low labor costs, cheap electricity, and economies of scale from mass production. Additionally, price competition among Chinese companies has intensified the price decline. Especially since the beginning of this year, Chinese companies have significantly lowered prices. Some in the battery industry suspect that China may be trying to drive competitors out of the market.

Posco Future M, the only domestic anode material producer, is struggling as it cannot match Chinese prices. The prices Posco Future M offers to the three major domestic battery companies?LG Energy Solution, Samsung SDI, and SK On?are reportedly about $4 per kilogram, which is 40-50% more expensive than Chinese companies. Posco Future M imports graphite raw materials from China, processes them into anode materials, and supplies them domestically.

Domestic battery cell manufacturers also find it unavoidable to purchase cheap Chinese anode materials as they compete with Chinese companies in the global market. Most of the three major domestic battery companies purchase anode materials from Chinese companies such as BTR, while some procure from Posco Future M and Japan's Mitsubishi.

Posco Future M's anode material plant utilization rate has plummeted to around 30%, triggering an emergency. A senior official from the company said, "If the current situation continues, we may have to stop the plant at any time." The company recorded an operating loss of 15.8 billion won in the third quarter due to inventory valuation losses of cathode materials and decreased sales of anode materials in its battery materials business.

In the battery industry, there is a strong call for the government to support Posco Future M, the only domestic graphite anode material producer, as China weaponizes graphite as a resource. Measures such as direct subsidies, tax credits, and electricity fee reductions are being proposed. There is also discussion about requiring the three major battery companies to purchase a certain portion or more of anode materials from Posco Future M.

According to SNE Research, China holds seven of the top ten positions in the global anode material market, Japan has two, and Korea has one. As US-China trade tensions escalate, China recently included graphite among the export items to the US, along with gallium, germanium, and antimony. Since China occupies over 90% of the global anode material market, if China blocks graphite exports, global electric vehicle production will suffer a significant blow.

The government, led by the Ministry of Trade, Industry and Energy, is preparing support measures for the graphite anode material supply chain. An official from the ministry said, "Graphite is a core material for batteries, and we are exploring various measures to stabilize the graphite supply chain," adding, "Specific details have not been decided yet." The government plans to announce a basic supply chain stabilization plan at the Supply Chain Stabilization Committee meeting next week. Measures for specific items such as graphite anode materials are expected to be prepared afterward.

However, direct subsidies or tax credits, which have been mentioned by some, are expected to be difficult. Another ministry official said, "Direct price subsidies do not align with market competition principles, and since the company does not pay much tax, tax credit benefits are also expected to be limited."

Meanwhile, Posco Future M operates a natural graphite plant in Sejong with an annual production capacity of 74,000 tons and an artificial graphite plant in Pohang with an annual capacity of 8,000 tons. The production capacity of the artificial graphite plant is planned to expand to 13,000 tons by August 2025. A Posco Future M official stated, "Regardless of the utilization rate, investment and expansion of the Pohang artificial graphite plant are proceeding as planned."