Graphite, the largest mineral component in electric vehicle batteries by weight, is facing an unforeseen surge in demand as electric automakers scramble to secure their supply chains. This panic leads to concerns about potential graphite shortages in the coming years.
The Proactive UK expects EV batteries to drive 50% of global graphite demand by the end of 2023.
In effect, global established automakers Tesla, Toyota, and Mercedes-Benz face challenges navigating a supply chain bottleneck caused by the unprecedented EV demand.
Demand-supply issue
While graphite stores have historically seen a surplus, the rapid growth of the EV industry has significantly impacted supply.
“Because graphite is an abundant mineral and there are many projects worldwide, there is an expectation supply will simply lift over time to meet this rising demand, and thus keep prices down. I am not so sure this is a correct assumption.”
Mike Ralston, Blencowe Resources PLC Director
Director Ralston also noted that the increase in new graphite mines has been slow, hampered by restrictive capital expenditures and testing facility bottlenecks, particularly in China.
Furthermore, Western markets like US and EU are aggressively pursuing a graphite supply chain for their EV-related targets.
In fact, EV sales surpassed 10 million worldwide in 2022, indicating a notable jump from 6 million in the previous year.
That considered, the industry projects to witness a further 50% growth rate in EV sales, signifying the demand for approximately 900,000 tonnes of graphite by late 2023. However, natural graphite usage is estimated to be at 450,000 tonnes, while the remaining are said to be synthetic.
It must also be noted that demand for graphite is not limited to electric automakers. For instance, South Korean steelmaker Posco alone requires an amount almost equivalent to the entire current market demand by 2028.
Unlike other metals, graphite is not reusable, exacerbating the supply challenges.
Reaching the inflection point
Tirupati Graphite PLC Executive Chairman & Managing Director Shishir Poddar warned that the industry is about to hit an “inflection point.”
The current production levels may not be sufficient to meet the surging demand, which will potentially cause shortages and price increases.
The impending scarcity of graphite poses a significant challenge to the EV industry, especially for automakers transitioning to fully electric production.
As demand outpaces supply, shortages and price increments will likely ensue, echoing past experiences in the lithium and other battery metal markets.
“I believe there is a profound impact coming like we have seen in lithium and other battery metals (cobalt, nickel, manganese) in the past. It is difficult to predict exactly when, as markets have many different moving parts, but the accelerating demand is real. There are over 200 battery megafactories in some stage of development and they will all require graphite ahead. The supply restraints discussed above are real.”
Mike Ralston, Blencowe Resources PLC Director
Potential opportunities and risks
Pure-play graphite producers stand to benefit from the surging demand and could realize better prices for their products.
However, the sector also faces risks, with most primary graphite coming from China. Apart from that, mining and processing graphite also require specialized methods and a learning curve for new entrants.
“It is a material which has its own peculiarities, its own specialised methods of doing things, So there is a learning curve for new entrants.”
Shishir Podda, Tirupati Graphite PLC Executive Chairman & Managing Director
See Also:
- Tesla publishes its 2022 Conflict Minerals Report
- Mercedes-Benz to secure critical minerals with Rock Tech’s first lithium refinery in Germany
- US and Japan partner on EV battery minerals to lessen reliance on China
- Western Australia: A global battery and critical minerals hub
- Dual carbon goal supports growing energy storage sector in China
The future of the graphite industry hangs in the balance as it grapples with increasing demand from the booming EV market.
With potential supply shortages and rising prices on the horizon, both EV makers and graphite producers are bracing for a transformative period that could shape the future of the electric mobility revolution.
All that said, the looming impact on the graphite industry calls for proactive measures to ensure a steady and sustainable supply of this essential battery mineral.
