According to the International Energy Agency, electric car sales around the world rose by 54 per cent in 2017, taking global stock across the three-million threshold. As the EV market grew, so did the strategic materials sector, namely lithium, graphite, cobalt and other materials that are used in the EV batteries.
There are already multiple signals that indicate that graphite will become one of the hottest commodities in the next decade. First of all, let’s explore current demand and supply of graphite in relation to the electric vehicle market.
One 75kwh battery requires 90 kilograms of coated spherical graphite which in turn requires 225 kilograms of natural flake graphite. Natural graphite mined in 2017 was 1,200,000 tpa, with China producing more than half of it. Of the total natural demand supply, flake graphite which is used in the EV battery production was 600,000 tpa.
Graphite, compared to a typical precious or base metals project, has an exceptionally quick timeline to get in production and incomparably lower Capex requirements. That makes graphite projects very low risk for investors with huge upside potential which comes from a small graphite market (about 450,000tpa) on the verge of quadrupling in the next couple of years. The exponential growth of graphite will mostly come from huge graphite anode Gigafactories producing Lithium Ion batteries for electric cars where graphite’s use in kilograms is four times higher than lithium’s. Some of these factories (Panasonic Tesla, LG Chem, CATL, Samsung SDI, Northvolt etc) have been commissioned and their construction and ramp-up are in progress but there are many more that are being built by LuiMao Graphite China in conjunction with BAIC Automotive Group Co., Ltd, ShanShan Technology and BTR New Energy Materials for a total capacity of 300,000 tpa.
Another part of the increased graphite demand is expected to come from the commercialization of graphene, that miracle material of the future discovered at the University of Manchester in the beginning of the century, which promises to revolutionize aviation, electronics, medicine, and water desalination, among other things.
Last but not least, as China races to increase its own production of natural graphite and locks in strategic contracts for the supply of natural graphite with graphite-producing countries such as India, Brazil, Canada and Mozambique, both the U.S. and Europe have listed natural graphite as a critical mineral because they do not currently produce any.
In summary, we would like to highlight below some of the recent news behind the soaring demand for graphite:
Tesla plans to produce 500,000 Electric Cars until 2020 – this alone will increase the current graphite demand by 20%
Europe plans to ban combustion engine vehicles by 2040 – this will result in replacing approximately 300,000,000 cars and will increase the current graphite demand by 10 to 15 times
Graphite demand for batteries is estimated to multiply to more than 800,000 tons a year in 2030 from just 13,000 tons in 2015 (Source: Longer Term Investments Smart mobility, UBS 2017)
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