Given the seeming inevitability of a graphite supply crunch, it’s no surprise that investor interest in the metal is rising. However, China is the top producer of graphite by a long shot, and it’s not particularly easy — or indeed desirable — to invest in companies mining graphite there.
Instead, many investors are looking to North America for graphite investing opportunities, particularly since Tesla Motors’ (NASDAQ:TSLA) announcement that it plans to source the lithium, graphite and cobalt it needs for its gigafactory from companies working on the continent. The fact that Tesla recently backed up that statement by signing two lithium supply deals with companies whose projects are in North America has only strengthened interest in the area.
But while investors are keen to take stakes in North America-focused graphite companies, the fact remains that very few companies are producing graphite there. In fact, in 2014 only two North American countries produced any graphite at all — Canada put out 30,000 MT of the metal while Mexico produced just 8,000 MT. Meanwhile, the US produced none at all.
Market watchers are thus understandably wondering whether North American graphite production is set to rise, and in particular whether graphite mining in the US will ever happen. On that note, here’s a look at the history of US graphite production and what the country may do in the future.
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Stats on graphite mining in the US
Graphite is deemed a critical material by the US and other countries, and about a century ago it was mined abundantly there, mostly in Alabama. A New York Times article states that in 1916 the country produced 10.9 million pounds of crystalline graphite, while in 1917, it put out 2,622 tons of amorphous graphite.
However, according to a report from the US Geological Survey, graphite mining in the US has long since stagnated. In fact, the metal has not been mined in the country since 1990, when United Minerals suspended operations at its graphite mine in Montana.
As a result, the US now imports all of the graphite it requires. In terms of exactly how much the country needs, another US Geological Survey report states that in 2014, 90 US firms consumed 53,200 MT of natural graphite valued at $57.5 million.
Total imports for that year stood at 62,400 MT of natural graphite — of that amount, 65 percent was flake and high-purity graphite and 35 percent was amorphous graphite. The US’ main sources of graphite for the year were China (45 percent), Mexico (28 percent), Canada (17 percent) and Brazil (6 percent). The other 4 percent was derived from various other sources.
The US mainly used that graphite in brake linings, foundry operations, lubricants, refractory applications and steelmaking.
A growing need for graphite
The above statistics indicate that the US seems to be meeting its graphite needs despite the fact that it does not produce the metal. However, the country has made clear that it’s not satisfied with the status quo, and — as mentioned — considers graphite a critical material.
Case in point: in its Strategic and Critical Materials 2015 Report on Stockpile Requirements, the US Department of Defense includes graphite on its list of shortfall materials, identifying a gross shortfall of 82,612 MT. Of the metal, the report states, “[o]ne key sub-segment of the market for graphite is in high demand whilst supply adequacy is uncertain.” Specifically, it identifies lithium-ion batteries and expandable graphite as applications that require “top quality flake graphite.”
What’s more, the report appears to recognize that the US may not always be able to get its graphite from the sources it currently uses. “Demand for top quality natural flake graphite has led to recent exploration activity mainly in Canada but exploration often fails to result in production,” it states.
And while the report does note that synthetic graphite and organic composites could be used as substitutes for natural graphite, it cites “[i]ncreased costs” and the lengthy production process for synthetic graphite as issues with both of those plans.
It’s clear that while graphite mining in the US is currently not happening, the country recognizes that it’s something that needs to occur. Stay tuned for an overview of Graphite One Resources (TSXV:GPH) and Alabama Graphite (TSXV:ALP), two companies that are currently exploring for graphite in the US.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.