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China’s crackdown on industrial pollution, developments in the fire-resistant building materials sector and growing EV demand are causing significant supply shifts in the large flake graphite sector, with ASX-listed Triton Minerals as well placed to capitalise as any emerging producer.

In 2018, China produced between 70 and 80 percent of the world’s graphite and supplied 100 per cent of the natural graphite used by lithium-ion battery manufacturers.

Traditionally mined out of Shandong, the province is seeing exponential grade decline, depleted ore reserves, and widespread site closures due to increased environmental regulation.

According to Roskill, in 2016 these closures resulted in a 30 per cent year-on-year drop in Chinese flake graphite production.

In response to this, Chinese graphite miners have shifted focus towards the Heilongjiang Province, however the two main production areas in the region are both largely endowed with reserves of small flake graphite.

While China continues to have a surplus of this graphite class, the country’s ability to meet demand for large and extra-large flake graphite has begun to falter.

To add fuel to this fire, the rapid growth of the EV market has meant the commodity’s demand is likely to rise sharply over the next decade. The mineral, in both its small and large flake forms, is a vital component in the production of lithium-ion batteries.

In 2018 lithium-ion battery production accounted for roughly 25 percent of the graphite market. For example the Tesla Model S, the highest profile EV currently on the market, requires around 85 kilograms of the mineral per unit.

Forecasters suggest that large flake graphite production will have to at least double by 2021 to keep up with even the most conservative estimates for the lithium-ion battery boom.

Triton Minerals (ASX:TON) has a significant interest in three world-class graphite projects in northern Mozambique and metallurgical testwork has confirmed the company’s flagship asset, the Ancuabe mine, is suitability for supplying the lithium-ion battery market with its large flake graphite size.

The large flake size also means Ancuabe graphite is suitable for expandable graphite applications such as corrosion and heat resistant materials, as well as fire retardant building supplies.

Demand for expandable graphite is expected to increase strongly over coming years, underpinned by governments around the world mandating the use of fire-retardant materials in all new buildings.

Historically brominate-based fire retardants have served this purpose, however issues with the toxicity of the material have seen them fall out of favour.

China is one such country that has mandated the use of fire-resistant building materials in all new buildings.

At an industry conference in Hubei Province in December last year, Jioang Yang, group vice president of China National Building Materials and president of the China Building Materials Application Technology Institute, told delegates that the country needed “40 million tonnes of fire-retardant building materials per annum, which will contain 5 percent expandable graphite.”

China currently consumes around 50,000 tonnes of expandable graphite a year. With 5 percent of 40 million tonnes equating to two million tonnes, it is not hard to see why many are buoyant about demand prospects for the material.

Based on a definitive feasibility study completed at the end of 2017, Triton’s Ancuabe project in Mozambique will produce 60,000 tonnes of high quality graphite concentrate a year from 2020.

Triton’s early works on Ancuabe are well underway and mining and processing is scheduled to commence in 2020.

Star Investing may have a commercial partnership with companies mentioned in this article. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.