EV speed cap: Is the graphite supply crisis stopping the EV revolution?

Here’s the good news: EV sales are up this year (4.2 million in the first half of 2022, nearly 60% more than the previous year’s numbers for both hybrid and battery-only) . Now for the bad news: It has exposed a supply crisis not only for lithium, but also for graphite, two of the minerals used in its manufacture, according to an industry report.

Exponential growth has fueled an increase in demand for raw materials, specifically graphite. There is a big challenge: up to 90% of battery-grade graphite is produced in one country: China.

Industry executives recently warned at a conference in Los Angeles that investment in the production of feedstock for electric vehicles is badly needed to meet the surge in demand for battery minerals, especially graphite.

WHAT IS GRAPHITE?

Graphite is a crystalline form of the element carbon. Due to its stability, graphite is used in different applications, including:
✏️pencils
🔥 refractory material
♨️nuclear reactor cores
🔋 anode material for lithium ion batteries.

‘Critical shortage’

The “critical shortage” of graphite production outside the mainland has prompted US Congressional Republicans to take action to shorten EV mining permits in the US after their House of Representatives victory in the Recent midterm elections.

Given the pent-up demand for electric vehicles, it’s not just Tesla that is facing a huge supply shortage of electric vehicle batteries, according to a report published by Benchmark Minerals, a price information agency and provider of specialized information for the supply chain. supply of lithium-ion batteries to electric vehicles.

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anode material

✏️ Several widely used lithium-ion batteries, from lithium iron phosphate (LFP) to nickel cobalt manganese (NCM) cathodes (positive), use graphite anodes (negative).

✏️ It usually takes around 5 years before minerals from the mine go into a product, due to permitting procedures.

✏️ The current tightness in the graphite anodes market is expected to last for the short term.

✏️ Graphite prices have been largely stable with low-end products at 35,000 yuan ($4,910) per tonne and high-end products at 60,000 yuan ($8,417) per tonne, according to Daiwa Capital.

✏️ China has had most of the world’s natural graphite production for over 30 years, producing around 60% to 80% of the world’s natural graphite.

✏️ Research is also underway to mass produce synthetic graphite.

Ford F-150 Lightning

The Ford F-150 Lightning. As of December 2021, Ford reported receiving more than 200,000 reservations for the F-150 Lightning, a full EV pickup.

supply crisis

The waiting list is long for certain EV models. Even in China, the world’s top battery maker, is also facing a supply shortfall, causing delivery delays and more frustrated customers.

Given the huge gap in bookings and pre-sale production (for the Cybertruck and Ford F-150, for example), it’s clear that it will take a while for battery manufacturers to scale up production capacity to meet demand.

Last December, Xpeng Motors, one of China’s leading EV start-ups, faced consumer complaints after deliveries of some of its models were delayed. Xpeng recently once again apologized to customers for delivery delays of its P5 sedans due to insufficient battery supply.

INDUSTRY CROSS

✏️ Ford Motor Company reported that as of October 2022 it sold twice as many electric vehicles as in October 2021.

✏️ The company said it has the capacity to build 15,000 trucks in 2022, 55,000 in 2023, and 80,000 in 2024. With bookings in the hundreds of thousands, online bookings were temporarily closed.

✏️ In July 2022, Tesla reported that it has already received over 650,000 refundable $100 pre-order deposits for its Cybertruck.

Peak in demand

As it turns out, as demand for electric vehicles increases, battery-grade graphite has become a scarce resource that manufacturers are having trouble with.

Tesla recently signed a deal to source graphite from Mozambique in a bid to ease the market’s reliance on a single source. Industry analysts point to an “urgent need” for EV battery makers to expand supply.

The exponential growth of the electric vehicle sector has boosted the industry’s requirements for graphite. Several widely used lithium-ion batteries, from lithium iron phosphate (LFP) to nickel cobalt manganese (NCM) cathodes (positive), use graphite anodes (negative). Research is on track to mass-produce synthetic graphite, but this too has its own challenges.

USA: 100% dependent

“Today, the US is 100% dependent on imports for its graphite needs,” said Anthony Houston, CEO of a company called Graphite One. “And really, when you sum it up, the US hasn’t extracted no graphite in more than 30 years”.

Graphite One is trying to create a graphite supply chain in the United States, but the installation takes time. The company has proposed a mining project in western Alaska, but it has to wait for a feasibility study, then permits and then construction.

Therefore, the supply of battery graphite is much more limited, according to Wood Mackenzie.

The price has risen by almost a third since 2021. That prompted American Battery Technology Co. (ABTC) to set up some production in part by recycling old batteries. But until there is enough domestic supply, US companies will have to import graphite, mainly from China, said Morgan Bazilian of the Colorado School of Mines. Last year, the US added graphite to its list of critical minerals.

Graphite Production Challenges

✏️ Graphite is abundant in many parts of the world, including the US, Africa, and Asia.

✏️ The main barrier: Commodification. That is, there is not enough to apply for mining permits, take the ore to a refining facility, and turn it into battery-grade materials.

✏️ Therefore, the supply of graphite for batteries is much tighter, according to Wood Mackenzie.

Standardization would also allow graphite production to attract investment, a conference in Madrid, Spain, organized by Fastmarkets was told in September 2022.

Demand for Battery Minerals

While demand for graphite has increased, investment outside of China has declined. At a battery conference in Barcelona, ​​Spain, held in September, one of the reasons identified was the lack of standardization that would make graphite production attract fresh capital.
Image Credit: Vijith Pulikkal | Gulf News

demand growth

Graphite prices have been largely stable with low-end products at 35,000 yuan ($4,910) per tonne and high-end products at 60,000 yuan ($8,417) per tonne, according to Daiwa Capital.

But graphite demand growth is forecast to average 18% higher year-on-year through 2030, according to Benchmark Minerals. By 2035, it is expected to double, according to energy and commodities consultancy Wood Mackenzie.

global reserves

In 2020, world graphite reserves were estimated at 323.8 million tons.

Turkey has the largest graphite reserves, followed by China and Brazil.

Together, these three countries accounted for 72% of the world’s estimated reserves of graphite.

Graphite accounts for about 5 to 15 percent of the cost of a typical electric vehicle battery. While Benchmark Minerals forecasts a potential shortage of graphite in the near term, this could spur higher prices and therefore more supply of the mineral to the market over time.

While whether that will be enough to stave off potential market shortages remains to be seen, a clearer picture may soon emerge.

BEV sales grew 75% in the year and PHEV sales 37%. Further growth is forecast for the remainder of 2022, with sales expected to rise 57% on the year to 10.6 million.

Policymakers in several economies have set dates to phase out the sale of gasoline and diesel cars. An EU-wide ban on the sale of these cars will take effect in 2035, while the UK has brought its own phase-out date forward from 2035 to 2030. China, the world’s biggest car market, is targeting 40% of vehicles sold. in the country to be electric in 2030.

KEY FACTS

• In 2020, global graphite mining production was approximately 954,000 tonnes, a 14% decrease from 2019.

• China is the world’s largest producer with 650,000 tons of production in 2020.

• Canada ranks as the tenth largest producer in the world with 12,000 tons of production in 2020.

• In 2021, China was the world’s leading producer of natural graphite, with an estimated production of 820,000 tons, or about 79% of total world production, according to a US Geological Survey report in January.

• China is expected to produce some 913,000 tons of natural graphite in 2025, according to a Frost & Sullivan report.
• Canada imported $20.6 million of natural and synthetic graphite, while exports were valued at $31.6 million.

[Source: Natural Resources Canada]

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