Lithium is not the most important element in lithium-ion batteries

Lithium has recently been called the “white oil,” and deservedly so. Lithium-ion batteries are becoming the backbone of the energy transition.

However, there is one mineral without which there will be no energy revolution. And the trillion-dollar electric car market will cease to exist. It is graphite, the key element that forms the anode of lithium-ion batteries. In 2019, the global market for graphite was valued at $14.9 billion. By 2027, it will reach $22 billion, and possibly much more.

Each battery for electric vehicles contains 20-30% graphite. This means that the demand for graphite will grow along with the demand for electric cars. And while electric car manufacturers have been busy sourcing lithium around the world, there have been concerns about graphite shortages.

About 90% of the graphite anodes used in batteries come from China. With demand for electric vehicles skyrocketing, it’s time to take a closer look at one of the key processors of this mineral, Graphex Group Ltd. The company has been in existence since 2008 and has been developing graphite processing methods since 2013. It is an experienced manufacturer with large long-term contracts in China.

Graphex is now looking to expand into the U.S. and European markets. Its president, John DeMaio, is working to make the company an integral part of the supply chain being created to support the western electric vehicle industrial complex being built. Graphex believes the graphene market will grow at an average annual rate of 29 percent over the next five years.

“The pace of electric vehicle sales will increase dramatically,” states IHS Markit. – The tipping point will be in 2027. That’s when electric cars will reach production cost parity with internal combustion engine vehicles in China. After that, production of electric cars will begin to increase like a snowball.

This means that the market for graphite for lithium-ion batteries will begin to expand rapidly. On average, each electric car requires up to 70 kg of graphite (the Tesla Model S requires even more). For every one million electric cars, about 75,000 tons of natural graphite will be needed.

In 2019, the demand for spherical graphite in China alone was 200 thousand tons. A year later, it will be 240,000 tons. And by 2028, graphite demand will increase to 1.9 million tons. In September 2021, the International Energy Agency (IEA) predicted that the electric mobility and low-carbon energy sectors will require 25 times more graphite per year by 2040 than today.

The important point is that there are no graphite mines in the U.S.; all of the mineral is imported. In 2018, U.S. manufacturers purchased 40,000 metric tons of graphite. And now the Tesla Gigafactory in Nevada alone needs about 35,200 tons of spherical graphite a year. And that gives Graphex a huge opportunity.

Since most of the graphite is mined in China, battery manufacturers around the world use Chinese raw materials. Asian battery manufacturers are even more dependent on China: They use raw material from China as well as recycled mineral. However, neither in the U.S. nor in Europe is there any meaningful recycling of graphite.

Graphex produces 10 thousand metric tons of spherical graphite a year. Now, the company says it is getting ready to expand its production to 40,000 metric tons per year. Raw material costs $500-800 dollars per ton, with a selling price of about $2,700-2800 dollars. The company says gross margins are maintained at 27-28%. This is a prime example of how graphite production can be one of the best places to look for opportunities in the lithium-ion battery supply chain.