US battery directive advances graphite projects

Tight graphite supply out of China and rising output costs globally are accelerating the push towards establishing domestic production in the US.

Prices for raw materials used in lithium-ion batteries, including graphite, have jumped in recent months. The Argus assessed range for 94pc grade graphite flake has gained 60pc in the past year on a fob China basis, driving up prices in Europe and the US. Strong demand has coincided with the lingering impact of power supply disruptions in China and rising energy costs globally that have constrained output.

The US imports 100pc of the graphite it consumes, and a lack of availability is raising concerns about security of supply. The US imported more than 176,600t of artificial and natural graphite in 2021, up from 107,400t in 2020, with China constituting its biggest supplier, data from UN database Comtrade show.

China supplies around three-quarters of the world's graphite, including all of the high-quality natural spherical graphite used in lithium-ion battery anodes. Anode material manufacturers favour a combination of artificial and natural coated spherical graphite (CSG) to offset cost and performance in electric vehicle (EV) batteries.

With EV production running ahead of industry expectations in the US and Europe, supply of graphite for battery anode materials is tightening and there are concerns about the industry's ability to continue meeting demand.

EV and battery producers are looking to secure supply from outside China, with the supply chain disruptions caused by the Covid-19 pandemic and geopolitical tensions raising questions about raw material security.

On 23 March, the US Trade Representative (USTR) reinstated exclusions to the country's tariffs on imports from China, including natural and artificial graphite, after they were allowed to expire last year. EV and battery manufacturers such as Tesla and SK Innovation had requested the waivers, citing the lack of US graphite suppliers.

In December, Tesla signed an offtake agreement with Australia-based Syrah Resources for the majority of the natural graphite anode material produced from Syrah's planned Vidalia facility in the US.

Syrah announced on 19 April that it received a conditional offer for a $107mn loan from the US Department of Energy to finance the expansion of the Vidalia plant to a capacity of 11,250 t/yr of anode material. The agreement comes after US president Joe Biden issued a directive on 31 March to use the Defense Production Act to secure US battery supply chains for EVs and renewable energy storage.

The directive is also providing impetus to other projects in the US to build graphite-processing facilities, including US-based Westwater, which is constructing the first phase of its Kellyton natural graphite processing plant; US-based Graphite One, which has partnered with Chinese anode producer Sunrise (Guizhou) New Energy Material for its proposed US graphite material plant; and Hong Kong-based Graphex, which plans to establish a US CSG facility via a joint venture with Emerald Energy Solutions.

For the near term, Canada is the second-largest graphite supplier to the US after China, and companies such as Nouveau Monde Graphite and Northern Graphite are accelerating their projects to supply the North American market. Nouveau Monde Graphite expects to start commissioning the 2,000 t/yr first phase of its Becancour graphite anode material plant and provide an update on phase 2, as well as its Matawinie Mine, by the end of June.

And Northern Graphite shifted in December from being a project developer to becoming the only graphite producer in North America and the third largest outside China with its acquisition of the Lac des Iles graphite mine in Quebec and the Okanjande deposit and Okorusu processing plant project in Namibia from Imerys for $40m.

By Nicole Willing