Analysis: China's graphite curbs will accelerate plans around alternatives

Graphex

23/10/2023 08:09

(Repeats story published on Oct 20 with no changes to text.)
    By Nick Carey, Akash Sriram and Ernest Scheyder
       Oct 20 (Reuters) - China's move on Friday to curb
exports of graphite, a key electric vehicle battery material,
will only accelerate efforts to develop alternative sources and
materials, but that will take time, industry executives and
analysts said.
    China, the world's largest graphite producer and exporter,
will require export permits as of Dec. 1 for some graphite
products, including spherical graphite used by automakers. It
refines more than 90% of the world's graphite into the material
used in almost all EV battery anodes, which is the negatively
charged portion of a battery.   
    China's decision may escalate trade disputes globally and
spur other countries to prioritize research into alternative
sources and materials, industry executives said.
    "We see China's move as a potential catalyst to highlight
the urgency of improving (U.S.) graphite supply," said John
DeMaio, president of Graphex Group's  6128.HK  graphene
division.    
    Graphex plans to open a graphite processing facility in
Warren, Michigan, by the end of 2024 to supply U.S. automakers
with at least 10,000 metric tons per year of the key metal.    
    Graphex aims to be a refiner in the West, not a miner. It
has graphite supply deals with Syrah Resources  SYR.AX  and is
looking for other sources, DeMaio said. 
    Tesla TSLA.O , which did not respond to a request for
comment, has been a leader in securing graphite and signing
deals with Syrah and Magnis Energy Technologies.  MNS.AX 
    New investments in the U.S. and Europe aim to challenge
China's stranglehold on graphite with a focus on developing
synthetic graphite, but industry experts have said the effort
will be an uphill battle. 
    Synthetic graphite could account for nearly two-thirds of
the EV battery anode market by 2025, Benchmark Mineral
Intelligence estimates.
    However, China battery materials giants such as BTR
 835185.BJE  and Shanshan  SSHOLG.UL  are also investing
hundreds of millions of dollars to produce more synthetic
graphite.
    Vianode, an Oslo-based synthetic graphite startup, is
starting small scale production in Norway next year, ramping up
to full scale in Europe and the U.S. by 2030 with enough
material to supply roughly 2 million EVs.
    Chief Operating Officer Hans Erik Vatne told Reuters
recently that developing synthetic graphite production is
costly, but that is the price to pay to reduce reliance on
China.
    "Are we as consumers willing to pay more to have that
sustainable materials in our batteries?" he said in August.
"That's really what we need to hope for because we need a higher
price because the capex of building such a plant with this
advanced technology is higher."
    
    SILICON SOLUTION?
    Another anode ingredient is silicon, which enables an EV to
drive longer distances before recharging.
    The maximum amount of silicon added to batteries is about
10% because the material expands during use and can degrade the
battery. But companies are working to push that share higher.
    U.S. startup GDI, for instance, is developing 100% silicon
anodes for batteries. GDI CEO Rob Anstey said his company is
talking to most automakers about the technology.
    "China is decades ahead in graphite and it's too late to try
and catch up," he told Reuters on Friday. "We must move to the
next level of lithium-ion and EV performance."
    "This is our time to wake up and say, okay we need to start
working on the next generation of battery and of materials," he
added.          
    The curbs by China also could lower exports and raise
prices, just like they did after a similar move in August for
two chip-making metals, gallium and germanium. 
    "This regulation is expected to increase the scarcity of
graphite, which in turn raises the cost of power batteries,
leading to higher production costs for EVs," Canalys analyst
Alvin Liu said.     
    Many automakers sell EVs at a loss, so higher costs would
not be welcome. With rising EV sales, automakers are racing to
lock in supplies from outside China, but shortages are looming.
    The main use of graphite has been in the steel industry, but
EV sales are due to more than triple by 2030 to 35 million from
2022, BMO Capital Markets forecasts.             
    Each EV on average needs 50 kg to 100 kg (110 pounds to 220
pounds) of graphite in its battery pack for the anodes, about
twice the amount of lithium.
    Automakers were largely quiet on Friday, studying the
decision.
    "We don't expect short-term effects on our supply situation,
but will watch the issue closely," BMW said in a statement. "We
could react quickly and flexibly in our risk management if
necessary."
    Volvo Cars  VOLCARb.ST  and Renault  RENA.PA  said it was
too early to comment, but they were following the situation
closely. 
    Mercedes  MBGn.DE  declined to comment, but said in June it
was diversifying raw materials sourcing, including graphite.
Stellantis STLAM.MI  and Rivian RIVN.O  declined to comment.
    Officials with Volkswagen, General Motors, Ford, Lucid and
Fisker could not immediately be reached to comment.

 (Reporting by Akash Sriram in Bengaluru, Ernest SCheyder in
Houston and Nick Carey in London; additional reporting by
Christina Amann in Berlin, Marie Mannes in Stockholm, Gilles
Guillaume in Paris, Ilona Wissenbach in Frankfurt; writing by
Ben Klayman; Editing by Josie Kao)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))