Electric vehicle (EV) battery makers are taking action to secure a stable supply of graphite from non-Chinese sources as a potential shortage of this critical mineral looms amid the increasing adoption of EVs.
Graphite, a form of carbon, is a key component of EV batteries that makes up between 95% to 99% of the anode (negative electrode) material in lithium-ion batteries. It is the largest component in an EV battery.
China produces almost 70% of the world’s natural and synthetic graphite and more than 90% of anodes for lithium-ion batteries, according to Benchmark Mineral Intelligence.
However, escalating geopolitical and trade tensions between China and the West, including Beijing in December limiting graphite exports, are turning EV battery makers towards alternative graphite sources.
In tandem, EV battery makers seeking to reap the benefits of tax credits provided under the United States Inflation Reduction Act (IRA) are being turned toward US graphite suppliers after the Departments of Energy and Treasury in December said that battery components manufactured by Foreign Entities of Concern (FEOC), including China, will have their eligibility for the tax credit limited.
The combination of these factors has prompted EV battery makers to take swift action in securing a graphite supply, with several significant offtake agreements signed in the last month.
Alabama-based Westwater Resources Inc (NYSE-A:WWR) in early February announced that it signed its first offtake agreement with SK On, a South Korean EV battery developer whose customers include Ford, Hyundai, and Volkswagen.
Westwater, which owns the Coosa graphite deposit and Kellyton graphite processing plant in Alabama, is positioning itself to be a US-based supplier of natural purified graphite for companies seeking an IRA-compliant source of this critical mineral.
Additionally, on February 9, Novonix Ltd (ASX:NVX) said it had inked an agreement with Panasonic Energy, Panasonic Corporation (NYSE:PC)'s battery manufacturing business, to supply it with synthetic graphite anode material from its Tennessee facility.
Then, on February 15, Quebec, Canada-based battery anode materials producer Nouveau Monde Graphite (TSX-V:NOU) announced significant off-take agreements with General Motors Company (NYSE:GM) and Panasonic Energy.
Need for IRA-compliant battery materials
Westwater Resources chairman Terence Cryan told Proactive that the combination of the IRA and subsequent joint Department of Energy and Treasury announcement in December regarding FEOC has had a meaningful impact on how customers view the importance of securing IRA-compliant battery materials.
“IRA-compliant companies such as Westwater who can meet the needs of OEMs and EV battery manufacturers are now seeing that renewed interest take the form of off-take sales contracts and in some cases, strategic investments,” Cryan said.
He said he sees this trend continuing as Westwater ramps up its battery anode material capacity at its Kellyton natural graphite processing plant, with the plant’s Phase 1 and Phase 2 capacity fully committed to customers in the near term.
“We operate in a capital-intensive industry so these off-take sales contracts are an important step in securing the project debt financing needed to complete our Kellyton plant that is currently under construction,” Cryan said.
“It's an exciting time for Westwater, as we advance our plans to be the first US vertically integrated supplier of natural graphite, from graphite concentrate to anode materials, to support the energy transition.”
Brent Nykoliation, executive vice president of battery materials development company Nextsource Materials Inc. (TSX:NEXT, OTCQB:NSRCF), also highlighted that EV battery makers were eager to secure graphite supply due to the need to source anode material from non-FEOCs to be IRA compliant.
“There are simply too few flake graphite mines in production outside of China and in non-FEOC jurisdictions to supply the quantities of flake feedstock for active anode material and be able to deliver the capacities that OEMs need by 2025,” he told Proactive.
Nextsource Materials is contributing to the global graphite supply with its Molo graphite project in Madagascar. The company achieved its first production in June 2023 and is in the process of optimizing activities at the mine to ramp up to nameplate capacity of 17,000 tons per year of SuperFlake graphite concentrate.
High demand for anode-ready, natural graphite expected
The fact that Westwater's and NMG's offtake agreements are for natural graphite, versus synthetic graphite, is notable for the graphite sector, Applied Graphite Technologies Corporation CEO Don Baxter believes.
“This proves that natural graphite will be a significant contributor to the massive demand coming from the lithium-ion battery industry, not just for EVs but for stationary storage, as well,” he told Proactive.
Baxter said that his conversations with OEMs have demonstrated an increasing need to secure a supply of input materials for battery production. “It has taken a while for this to materialize as attention has been on lithium, cobalt, and nickel for the cathode,” he said.
A major source of natural graphite will be flake and vein graphite from Sri Lanka, Baxter believes. He noted that this has been proven to perform well in batteries and have an improved environmental, social, and governance (ESG) footprint when compared to synthetic graphite.
Applied Graphite Technologies is advancing two natural vein graphite projects in Sri Lanka.
“The world needs millions of tonnes of anode-ready graphite and needs to develop it outside of China,” Baxter said. “Applied Graphite Technologies is focussed on mining natural vein graphite from Sri Lanka and we have experience in processing graphite into ‘anode ready.’”
