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Graphite is one of the hottest sectors in the resource space today, and has sparked investor interest and an exploration boom. Some of the most critical factors that have pushed the metal to the fore include the ongoing shift toward alternative energy and the issue of Chinese supply.
That first factor has become especially key since Tesla Motors (NASDAQ:TSLA) CEO Elon Musk announced early in 2014 that it plans to build a $5-billion lithium-ion battery gigafactory. Market watchers immediately began predicting how much lithium, cobalt and of course graphite the facility might require, and that speculation has only continued as Tesla has taken further steps, such as releasing a much-anticipated suite of rechargeable batteries.
Benchmark Mineral Intelligence has predicted that if the gigafactory reaches its target capacity of 35 GWh by 2020, it will require 25,000 tonnes of lithium, 112,500 tonnes of flake graphite, 45,000 tonnes of spherical graphite and 7,000 tonnes of cobalt. In 2014, flake graphite production was just 75,000 tonnes, while spherical graphite production was 30,000 tonnes.
It’s also worth noting that Tesla isn’t the only company with a lithium-ion battery megafactory in the works. LG Chem (KRX:051910), FoxConn Technology (TPE:2354), BYD (HKEX:1211) and Boston Power are also planning facilities of their own.
Furthermore, graphite is by no means used only in batteries. The three main types of graphite – amorphous, flake and vein – have a wide variety of uses. For instance, while the automotive and steel industries currently account for the majority of consumption, graphite is also used in pebble-bed nuclear reactors, fuel cells and solar panels.
As can be seen, graphite demand is almost undoubtedly set to rise significantly in the coming years. But what about supply? As mentioned, China is a key consideration when looking at graphite supply. At the end of 2013, the Asian nation ordered 55 graphite miners and processors in the city of Pingdu to cease production on environmental grounds.
While those shutdowns, coupled with impending megafactory demand, were expected to boost graphite prices, ultimately that has not yet happened. The consensus amongst markets watchers seems to be that a rebound will not occur until buyers become more concerned about impending megafactory demand.
Supply, demand and price aside, it would be tough to mention graphite without also discussing synthetic graphite and graphene, two materials that are similar to graphite, but also markedly different.
The former comes in two types: primary synthetic and secondary synthetic. Primary synthetic graphite is produced using different forms of precursor carbon, most commonly petroleum coke, and can be customized according to customer specifications. Secondary synthetic graphite is scrap powder graphite produced from machining either solid graphite electrodes or solid graphite shapes. Synthetic graphite can compete with natural graphite in some applications.
Graphene is a 2D material that was first produced in 2004, when two professors at the University of Manchester used Scotch tape to peel flakes of graphene off a chunk of graphite. It’s since been hailed as a “wonder material” for its superior strength, electrical conductivity and more.