Synthetic graphite plays a significant role in a few highly specialized industries. Here’s a look at what it is and why investors should know about it.
Synthetic graphite is a unique material that is often used in metal manufacturing and in energy devices such as batteries and solar panels.
Synthetic graphite is comprised of high-purity carbon and is known for its ability to withstand high temperatures and corrosion. Those characteristics make it a great option for highly specialized industries that need predictable results from their carbon materials.
Understanding the difference between synthetic and natural graphite is important for investors, as industries typically need a specific type of graphite for their applications. Here’s a look at the synthetic graphite market and what it has to offer.
Synthetic vs. natural graphite
Synthetic graphite is intriguing for investors because of its presence in lucrative industries with rising demand. However, before diving into the space it’s important to understand the nuances of synthetic graphite and some of the misconceptions surrounding it.
Firstly, the graphite market covers a range of different types of graphite, both synthetic and natural, that are used in their own applications and do not compete. Synthetic and natural graphite have no relationship except they’re both called graphite in the more broader marketplace.
Synthetic graphite is purer in terms of carbon content and tends to behave more predictably, which is why it has found a niche in solar energy storage and arc furnaces. Synthetic graphite can be significantly more expensive to produce than natural graphite, as the process is fairly energy intensive. In fact, the cost can be double or triple the standard price for natural graphite.
Restrictively high prices and specific use cases for synthetic graphite mean that in most markets it doesn’t often compete with natural graphite.
Types and uses of synthetic graphite
Synthetic graphite typically comes in two forms: electrodes and graphite blocks. The form of graphite directly determines which industries it will be used in.
Electrodes are primarily created using petroleum coke as a precursor and are almost exclusively used in electric-arc furnaces — these furnaces are used for melting steel and iron, and producing ferroalloys.
Graphite blocks — or isotropic graphite — are primarily used for energy storage in the solar industry. These blocks are made using the same petroleum coke process as electrodes, but differ slightly in the structure of the coke used.
Secondary synthetic graphite
Producing synthetic graphite also creates a by-product known as secondary synthetic graphite — typically yielded as a powder. It’s considered a low-cost graphite material and some forms of it can compete with natural graphite in applications like brake linings and lubricants.
Primary synthetic graphite
Primary synthetic graphite is not a by-product like its secondary counterpart. It is typically manufactured in powder form and used for high-end lithium-ion batteries. However, it is more expensive to produce and can cost the same amount as manufacturing an electrode.
Graphite market information
The outlook for the overall graphite market is positive, and is tied to the battery industry and energy storage applications. In terms of graphite demand, Benchmark Mineral Intelligence expects to see double-digit growth from the battery sector from 2022 onwards.
Andrew Miller, product director at Benchmark Mineral Intelligence, has said the firm attributes the growth to “stimulus packages boosting the long-term battery market trajectory, and ongoing commitments from original equipment manufacturers.”
Graphite demand from the lithium-ion battery sector is expected to rise substantially from the current level of nearly 200,000 tonnes per year in a 700,000 to 800,000 tonne market to nearly 3 million tonnes a year in a 4 million tonne market by 2030.
Roskill sees growth opportunities for both synthetic and natural graphite in the lithium-ion battery market. It expects total graphite demand to rise by about 5 to 6 percent per year over the next decade.
As a whole, it appears that the future is bright for graphite. However, synthetic graphite will still face somewhat of an uphill battle. Natural graphite is set to be the fastest-growing subset of graphite through 2030 — and improvements in purity are helping natural graphite enter the nuclear technology and high-end battery markets, which have typically been owned by synthetics. Price will certainly continue to be a determining factor in the competition between natural and synthetic graphite.
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This is an updated version of an article first published by the Investing News Network in 2017.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.