July 23 (Reuters) - Australia's Syrah Resources said it was undertaking a labour restructure at its Balama graphite project in Mozambique, including a 65% headcount reduction, as production remains suspended due to COVID-19 restrictions.

The supplier of graphite products said there was no natural graphite production at the project during the second quarter, as a result of restrictions which limited the mobility of the workforce and hit demand of electric vehicles (EV) sales.

"The current challenging market conditions are likely to continue into the second half, until Chinese and global EV demand growth regains momentum, and global steel production recovers", the company said in a statement.

Graphite producers and suppliers have been hurt by a prolonged downturn in sales in China, the world's top EV market, that worsened as a result of the coronavirus-induced slowdown.

As a result of weak market conditions, the timing of when production at Balama will restart is uncertain, Syrah added.

The cost cutting measures are expected to reduce Balama cash outflows to $7 million per quarter, with one-off implementation cost of about $1 million to be incurred during the third quarter.

Some 220 roles will be retained at Balama to support the resumption of production once travel restrictions are eased and end user demand improves.

(Reporting by Shruti Sonal in Bengaluru; Editing by Jacqueline Wong)