By: Koby Kushner, Mining Analyst, Red Cloud Securities
Of all minerals in the dominant EV battery raw materials, graphite represents the highest proportion by weight. For a typical 60 kWh Li-ion battery, graphite content ranges from approximately 40-70 kg – roughly nine times the amount of lithium content. Graphite, used on the anode side of the battery, is an extremely effective, heat-resistant, conductor. Further, its hexagonal crystal structure is ideally shaped for hosting Li-ions during charging and discharging.
Not all graphite is created equal. There is flake vs. amorphous, natural vs. synthetic, etc. The pricing equation is complex, as it depends on purity, shape, and flake size.
Purity often comes at the expense of flake size – and ultimately its end-use will dictate its desired characteristics. Pricing is further complicated by the fact that graphite has competing end users: heightened demand from the steel industry, its chief end use, may cause less supply for the battery industry, and vice versa.
Not all graphite needs to be mined; as previously alluded, graphite can be made synthetically – primarily from crude oil derivatives. However, synthetic graphite costs approximately twice as much to produce, and emits two-to-three times the CO2 emissions,
as natural graphite. Dwindling investment in oil production and higher demand for “green” minerals may make natural graphite he preferred anode material of the future
– with Benchmark Mineral Intelligence suggesting natural graphite demand may overtake synthetic demand before the end of the decade.
In terms of production, China dominates the graphite supply chain. According to the USGS, China represented approximately 65 per cent of global mine production in 2022, followed by Mozambique and Madagascar. North America produced 1.2 per cent of the world’s graphite supply in 2022, coming entirely from Canada and Mexico, with zero production in the USA. In both Canada and the USA, graphite is deemed a critical mineral.
According to Business Analytiq, the natural graphite price index in the USA rose about 12 per cent in 2022, which pales in comparison to Lithium chemical prices, which were generally up about 150 per cent. Like lithium, graphite pricing has industrial demand along with battery demand. However, lithium became primarily a battery metal in 2018, when battery demand overtook industrial demand. For graphite, that turning point was more recent: 2022.
We believe 2023 may be the inflection point for graphite. While the market was previously in oversupply, S&P Global is calling for a deficit as soon as this year, with this deficit expected to balloon in the following years. To satisfy 2035 demand, Benchmark Mineral Intelligence forecasts that 97 new, average-sized, natural graphite mines will be needed – higher than the new lithium, cobalt, and nickel mines required.