Graphite is the most abundant mineral in a typical Electric Vehicle battery, although its significance to the Electric Vehicle supply chain is frequently disregarded. Can we expect a shift soon?
It’s possible that this is why the world’s leading automakers like Elon Musk’s Tesla Inc (NASDAQ:TSLA) and General Motors (NYSE: GM) rushing to secure graphite supplies ahead of an impending supply-chain shortage.
Since electric vehicles are expected to make up more than half of the natural graphite market this year, this is why natural graphite mine developers like ASX listed Black Rock Mining (ASX: BKT) may be fielding calls from automakers in order to secure natural graphite supple outside of china.
The Mahenge Project in Tanzania, in which Black Rock Mining Ltd holds a 100% interest, is home to a multi-generational graphite resource and is one of the world’s largest JORC-compliant flake graphite resources, having a resource of 212 million tonnes at 7.8% TGC and a reserve of 70 million tonnes at 8.5% TGC.
Black Rock Mining claims that the development of its natural graphite has low capital expenditures, high margins, little technical risk, and excellent economics.
As legislation in the United States and Europe attempts to reduce reliance on China for critical minerals, shortages of material produced worldwide will become more prevalent.
Electric vehicle batteries are expected to account for around half of all the Critical Mineral demand by the end of 2024, which has been regarded as the key reason behind the supply squeeze.
Even though the critical minerals supply has been sitting on a surplus for years, the inevitable growth of the electric vehicle industry has been progressively nibbling away at this surplus.
There is a wealth of information available online indicating that the number of new graphite mines coming online would be delayed. This is due to the stringent capital investment requirements as well as bottlenecks in the largely Chinese testing facilities.
The need from Western markets for a graphite supply chain to fuel their own EV goals has only increased in recent years, particularly in the United States and the European Union.
The number of electric vehicles sold around the globe surpassed 10 million in 2022, representing a significant increase from 2021’s figure of six million. It is anticipated that this year will see sales increase by another 50% over last year’s numbers.
By the end of 2023, around 900,000 tonnes of graphite will have been used to produce the batteries for the world’s 15 million electric vehicles, each of which uses about 60 kilogrammes of graphite. There are also about 450,000 tonnes of natural graphite used, with synthetic graphite accounting for almost half of this total.
There is a growing demand for graphite, and it’s not just from the electric vehicle industry. Posco, a steel manufacturer in South Korea, is expected to have a need for graphite beginning in 2028 that will be nearly equivalent to what the market as a whole requires and produces at the present time.
Unlike other Critical Minerals aluminium, copper, and zinc, none of this graphite has a second life as an industrial metal. The market for synthetic graphite also seems to have plateaued and is not expanding at the present time. For the Electric Vehicle industry, and especially for the automakers just beginning their transition to an all electric production chain, this would be very troubling news indeed.
Since fewer mines will be brought online to meet rising demand, the supply gap between the two is expected to grow dramatically.
It’s common knowledge in economics that when demand exceeds supply, shortages occur and prices rise. This is especially true if production levels are unable to increase to meet the increased demand.
It is impossible to say exactly when, since markets have a lot of different moving components, but the rising demand is real. Many investors believe that there is going to be a tremendous impact coming, similar to what we have seen in lithium and other Battery Metals (cobalt, nickel, and manganese) in the past.
Graphite is necessary for the continued operation of the over 200 battery mega plants currently under construction or planning. The limitations on supply that were mentioned earlier are very much a reality.
This has the potential to be beneficial to pure-play graphite manufacturers, who will certainly be able to realise a greater price for the commodity, but with some unique risk factors.
Mining and processing this critical mineral and supplying what the customer requires is itself an educational process, and this is on top of the source risk of 60% to 70% of primary graphite or graphite concentrate still coming from China. Just getting through the qualifying procedure can take up to ten years.
Since graphite is a mineral with its own characteristics and specialist practises, there is an educational process for those just getting into the industry.
Let’s hope the new graphite suppliers can avoid the pitfalls of their predecessors and get their product to market as quickly as possible, for the sake of the Electric Vehicle sector.
