The United States (US) and European Union (EU) have declared graphite a supply critical material.
A supply critical material is one which supports the production of other goods and services but has a high risk associated with supply.
Lithium-ion batteries contain almost twenty times more graphite than lithium. The demand for lithium-ion batteries is on an upward trajectory because of their irreplaceable use in cell phones, laptops, tablets, and electric vehicles.
According to a Canaccord report, “annual flake graphite production will have to increase by a factor of six by 2020 to meet incremental lithium carbonate requirements for batteries.”
The US and EU almost completely rely on imports to secure graphite supply. More than 50% of the supply of graphite in the US comes from China.
China holds most of the graphite supply market, but the country will not be able to meet the ever-increasing demand for the mineral. Especially because graphite electrode production fell after the Chinese government shut down some pollution-causing industries.
In fact, China itself is currently importing graphite to support its growing tech industry. The annual demand for expandable graphite is approximately 70,000 tonnes in China.
Large-flake graphite is used in expandable graphite. Large flake prices increased 25% in October 2017 to average $998 per tonne, according to a Roskill report.
The report goes on to say, “Prices for a high-grade material is forecast to continue rising through late 2017 and into 2018 as battery demand continues to rise and flake graphite producers rush to ramp-up new production.”
Although graphite has several uses, its most critical use will be in the automotive industry. Just to give some perspective, Tesla aims to make one million by 2020. Similarly, Volkswagen plans to make one million cars by 2025. Other major automakers have their own projections to enter the electric vehicle space.
Analysts suggest this may be the best time to consider investing in junior graphite mining companies sprouting up to provide the critical material.