The market for battery anode raw material graphite is set to move into deficit by mid-decade on rising electric vehicle demand, with a number of companies looking to establish graphite mines and processing facilities outside traditional supplier China in a bid to diversify the supply chain.
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Natural graphite is forecast to move into a structural deficit as soon as 2023-24, as global demand growth for processed graphite, also known as spherical graphite, begins to outstrip supply, EIT InnoEnergy and European Battery Alliance Policy Manager Ilka von Dalwigk told S&P Global Commodity Insights.
She highlighted forecasts from UBS, which estimates a natural graphite deficit of 3.7 million mt in 2030, representing some 37% of the market.
Global plug-in light duty EV sales are expected to reach 13.7 million units in 2025 and 26.8 million units in 2030, up from 6.3 million units in 2021, according to S&P Global analysts.
This higher demand for EVs has boosted battery raw material prices, with the Platts seaborne lithium carbonate and lithium hydroxide assessments from S&P Global up 122% and 152%, respectively, since the start of 2022 to $75,000/mt CIF North Asia and $80,000/mt CIF North Asia on May 6.
"As the main material used for battery anodes, regardless of which cathode chemistry is chosen, graphite is a vital mineral required to support the growth of the battery market," von Dalwigk said. She added that, although EV graphite anodes could be synthetic or natural, by 2030 natural graphite anodes are expected to represent almost half of demand.
"The market share of natural flake graphite is expected to increase due to its favorable environmental footprint, especially as OEMs become ever more focused on supply chain sustainability," von Dalwigk said.
Critical Minerals Association founder Jeff Townsend also told S&P Global that current trends showed there would a discrepancy between global supply and demand going forward, which could be seen from the number of gigafactories being built.
"There is simply not enough in the western world," he said. "Most of the world's graphite goes through China so there will be significant competition for 'Western' graphite between Western companies. Doing graphite projects outside of China is very hard to do at traditional commercial levels."
China produced an estimated 820,000 mt of graphite in 2021, around 79% of total global output, and up from 762,000 mt in 2020, according to the US Geological Survey.
In comparison, the second-largest producer was Brazil at an estimated 68,000 mt, followed by Mozambique at an estimated 30,000 mt, Russia at 27,000 mt, and Madagascar at 22,000 mt, the USGS said in its Mineral Commodity Summaries January 2022.
Graphite projects outside China
To try to meet rising demand, future graphite mining is set to be focused in eastern Africa, as well as Scandinavia and the Americas, with a number of projects being developed at different phases.
While there are a number of companies developing graphite projects, demand is massive, Townsend said, adding that it was also important to look at whether the graphite to be extracted would be of a quality useful for the future industry.
"What we're finding is that simply the projects coming on board are not going to meet the objectives of some of the battery sector -- you need relatively pure graphite for longer distances... that's scarce and there are also some ESG questions around the mines that do exist," Townsend said.
Mined graphite is usually processed to 95-96% carbon purity on site, but must be processed further elsewhere into a spherical, coated 99.95% purity product to be used in battery cells.
More graphite processing facilities are also needed outside of China, which processes most of the world's spherical coated graphite.
To mitigate predicted supply chain constraints, new projects to produce both sustainable natural and synthetic graphite should be promoted, von Dalwigk said.
She cited Talga in Sweden and Norway-based Skaland as two examples of sustainable natural graphite production projects in Europe, along with Vianode in Norway as a synthetic anode material developer.
Von Dalwigk also pointed out that there are projects under way to produce carbon-based anode materials from bio-based materials, such as Finnish company Stora Enso, which converts lignin separated from wood into a carbon anode material.
Such products could replace synthetic and non-renewable graphite material in the future, she said.
"Though pioneering projects such as this are still to be upscaled...they provide a clear example of why more research support for innovative materials including open research facilities for testing, upscaling, and piloting are vital to ensure we meet the demand for graphite both quickly and sustainably," von Dalwigk said.
Governments need to be more aware of the upcoming graphite deficit, Townsend said, adding that the CMA was formed to increase awareness of the importance of such critical minerals.
The CMA provides a secretariat to the UK's All-Party Parliamentary Group for Critical Minerals, or APPG, which was established in March 2020 to highlight the country's need for a secure, sustainable supply of critical minerals.
The UK needs to be able to source more and better graphite, as well its own industry processing, Townsend said.
"Without it we're totally dependent on China currently, but it'll be Europe in the future, so we're trying to highlight that issue and trying to get the government to be a bit more sympathetic to the needs of industry," he said.
In Europe, EIT InnoEnergy supports projects along the entire battery value chain, from mining to recycling, which also includes graphite.