Focus: Synthetic graphite for EV batteries: Can the West crack China's code? (updated)

Elkem ASA

13/09/2023 15:42

(Adds Altor Equity Partners as an owner of Vianode)
    By Paul Lienert and Nick Carey
       Sept 12 (Reuters) - New investments in the United States
and Europe aim to challenge China’s stranglehold on a key
ingredient used in most electric vehicle batteries – graphite –
but industry experts said that will be an uphill battle.
    The focus is shifting to a new front: Synthetic graphite, an
element developed in the late 19th century, but only redirected
toward EVs in the past decade. 
    Its application is growing quickly. Synthetic graphite could
account for nearly two-thirds of the EV battery anode market by
2025, estimates Benchmark Mineral Intelligence.
    Each EV on average needs 50-100 kg (110-220 pounds) of
graphite in its battery pack for the anodes, the negative
electrodes of a battery, about twice the amount of lithium.
    While the market for synthetic graphite is expected to grow
more than 40% over the next five years to $4.2 billion in 2028,
according to researcher Mordor Intelligence, companies looking
to carve out a new direction face formidable competition from
China.
    That country refines more than 90% of the world’s natural
graphite — used in virtually all EV battery anodes — and Chinese
battery materials giants such as BTR  835185.BJE  and Shanshan
 SSHOLG.UL  are investing hundreds of millions of dollars to
ramp up production of synthetic graphite.
    The introduction of synthetic graphite in the battery supply
chain “is mature and commercially successful in China,” said
analyst Victoria Hugill of UK-based researcher Rho Motion.
    “It's dumbfounding, especially on the anode side, to see the
number and the scale of participants” in China, said Chris
Burns, chief executive officer of Australian battery materials
supplier Novonix  NVX.AX  . “Guys like BTR and Shanshan just
keep growing out of proportion to the rest of the world.”
    While Chinese producers control a significant share of the
small, but growing synthetic graphite market, newcomers such as
U.S.-based Anovion, Novonix, and Norway's Vianode are being
driven by two factors, said Hugill.
    "It’s easier to set up a synthetic graphite production
facility than it is to commission new mining sites for natural
graphite” because producers can take advantage of incentives in
last year's U.S. Inflation Reduction Act to build synthetic
graphite capacity in the U.S. or Free Trade Agreement partners,
she said. And new facilities don’t need to be located near a
graphite mine, she said.
    New synthetic graphite production operations in the United
States, including Anovion’s $800 million plant in Bainbridge,
Georgia, and Novonix’s $160 million plant in Chattanooga,
Tennessee, will benefit from U.S. incentives included in the IRA
and the bipartisan Infrastructure Investment and Jobs Act,
executives said.
    Vianode, owned by Norsk Hydro  NHY.OL , battery maker Elkem
 ELK.OL  and Altor Equity Partners, aims to build synthetic
graphite facilities in both Europe and North America, with
enough capacity to supply up to 2 million EVs a year by 2030. 
    It's a unique proposition: A production process powered by
renewable energy, with a carbon footprint 90% lower than that of
Chinese graphite refiners, according to Hans Erik Vatne, a
former Hydro executive, now interim CEO/COO of Vianode.
    The Vianode process could dispel concerns that synthetic
graphite's production process, traditionally based on fossil
fuels, is not sustainable. Vatne also cites the benefits of
synthetic graphite: Faster charging and longer battery life.
    Other experts note synthetic graphite is generally higher
purity and offers better and more predictable performance than
natural graphite. 
    And the price gap between the two has narrowed significantly
this year, driving producers to blend even more synthetic
material into their battery anodes, which still represent less
than 10% of the cost of an EV battery cell.
    The growing need for clean, consistent battery material “is
one of the main drivers for synthetic graphite,” according to
battery expert Bob Galyen, founder of Galyen Energy and former
chief technology officer of China’s CATL  300750.SZ , the
world’s largest EV battery maker.
    Still, the construction of new production facilities for
synthetic graphite, even with federal incentives, requires a
staggering investment, said Novonix's Burns. “The biggest
challenge that our industry faces is the amount of capital that
has to flow to make a dent in the supply chain.”
    In the meantime, China will continue to dominate synthetic
graphite production, according to researcher Fastmarkets, which
forecasts Chinese production of the material will grow from
about 1.6 million metric tons this year to 2 million in 2030. 
    “The real truth is China will be the biggest player in this
market for the next 10 or 20 years,” said Burns. “The balance of
supply and demand is and will remain absurdly askew for the
balance of this decade in terms of North American options.”

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 (Reporting by Paul Lienert in Detroit and Nick Carey in London;
editing by Timothy Gardner)
 ((Paul.Lienert@thomsonreuters.com; mobile +1 313-670-2452;))