North American Graphite Juniors Face Hurdles to Supply the EV Battery Space

Demand for graphite from North America is expected to continue increasing in the coming years as governments push for more domestic production to meet increasing sales of electric vehicles (EVs).

In order to meet this unprecedented demand, Benchmark Mineral Intelligence estimates that up to 150 new operations across natural and synthetic graphite are needed by 2035. Graphite is one of the most important elements in any EV battery, with between 50 and 100 kilograms of graphite, whether synthetic or natural, present within each vehicle.

Being a major industrial mineral, graphite already has scale on its side and has been able to accept early demand growth from lithium-ion battery sector with relative ease, according to Project Blue analysts. There are also several large graphite projects in development, and supply availability hasn’t been a major concern to date.

“However, new geopolitical legislation in Europe and North America is creating new interests and driving change, particularly from the automotive companies themselves, which is a relatively recent development,” they said.

To date, there have only been two graphite supply deals signed directly between an automaker and a graphite company. Elon Musk’s Tesla (NASDAQ:TSLA) has inked agreements with graphite producer Syrah Resources (ASX:SYR,OTC Pink:SYAAF), which operates the Balama project in Mozambique, and Magnis Energy (ASX:MNS,OTCQX:MNSEF), which is developing its Nachu project in Tanzania. But whether more EV makers will get involved in the upstream graphite supply chain is yet to be seen.

The recently launched Inflation Reduction Act in the US is pushing companies to look for sources of key battery metals in the US or allied countries. But North America currently lacks domestic graphite mine production.

“Graphite in North America is only produced from two operations in Canada, and the US has not produced any graphite in the past decade,” Project Blue analysts told the Investing News Network (INN). “Therefore, the current graphite supply in North America is not sufficient to complement the growth in the country’s graphite demand for EVs.”

Right now, most of the graphite produced in North America goes into industrial applications locally.

“Developing projects are instead focused on the growing battery market. However, most of the refining capacity is in China,” James Willoughby of Wood Mackenzie told INN. Building downstream processing capacity is the goal of many junior mining companies, which have realized that vertical integration will be key going forward.

“But this requires a great deal of expertise, finance and time. Companies are unlikely to copy existing technology, as this uses hydrofluoric acid, which can be damaging if handled incorrectly,” Willoughby explained.

“They are instead looking at 'greener' and cleaner proprietary methods, but given that no company has yet produced spherical graphite in the US on a commercial scale, these are still unproven.”

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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