Tesla Inc. last week signed an agreement with Australian mining company Syrah Resources Ltd. to source materials from the company’s operations in Louisiana, with raw materials sourced from Mozambique. Meanwhile, South Korea’s POSCO, the world’s largest maker of natural graphite anodes, bought a 15% stake in China’s Inner Mongolia Sinuo New Material Technology Co. Graphex Group Ltd., a listed company in Hong Kong, recently set up a US subsidiary and is looking to build a plant there. He also signed an agreement with the German company Desatec GmbH for the processing and sale of graphite materials and established a local manufacturing branch. Other smaller companies are only now building facilities in North America.
This wave of early – and prescient – moves by some manufacturers to get their hands on materials as basic as graphite make it clear: it’s no longer just about higher value, harder to get metals like lithium and cobalt. Supply shortages are arising for the entire electric vehicle battery supply chain, just as companies like Tesla are selling record numbers of green vehicles. From lithium compounds and spodumene to PVDF – all raw battery components – prices over the past year have increased threefold. Now graphite is also beginning to emerge.
A form of carbon, graphite is essential for making the anode, or negative terminal, of power supplies and is also used in steelmaking and the nuclear industry. Nearly 90% of production is concentrated in China, meaning another key battery element is made in the country which is already experiencing disruptions from omicron outbreaks in key industrial regions like Tianjin. Most new graphite electrode capacity is also produced in the world’s second-largest economy, according to data from BloombergNEF, followed by Japan, India and the United States.
Until now, new generation batteries have largely focused on the material side of the cathode – nickel cobalt manganese, lithium iron phosphate, etc. Few have focused on the chemical mix of anodes, with graphite expected to remain the dominant material until at least 2035, according to BloombergNEF.
As the demand for batteries continues to increase due to the electric vehicle craze, the capacity of this part of the supply chain will also need to increase. Most will be for passenger cars.
The material occurs naturally but is also produced synthetically. However, it is not easily replaceable, which puts additional pressure on costs. Over the past year, synthetic graphite prices have increased from 6% (for the high-end variety) to around 40% (mid-end). It was even then that Chinese producers were able to reduce the cost of graphitization – a key process that accounts for about half the cost of an anode – by 15 to 20%. A quarter of the price corresponds to raw materials. If manufacturers are unable to keep prices low while they try to increase capacity, battery costs will only continue to rise. This will make it more difficult to build supply chains, even on a global scale.
At this point, EV market players who have been slow to catch up, including automakers and battery makers, can’t just start laying claim to future supply – they can be left behind. . They will have to think years ahead and start investing all along the value chain, not just in fancy tech gadgets and batteries as a whole.
In the past, investing and planning for commodity materials like graphite seemed pointless – availability was taken for granted. Now, with shortages and supply chain issues, this seems like a realistic and prudent business strategy.