China and the role of spherical graphite in EV batteries

By Simon Moores
Published: Friday, 14 March 2014

Is Chinese graphite as green as Tesla would like? Natural and synthetic compete for lion’s share of emerging electric vehicle battery market

Tesla motor's $5bn electric vehicle (EV) battery plant plans have once again got the world talking about the critical minerals and metals that supply the hi-tech products of today and tomorrow.

The pending battery economy is coming. There is little doubt about that considering how mobile the world has become in the last 5 years. This mobility has been made possible by the lithium-ion battery and the minerals that make it.

With Tesla planning to more than double the worlds lithium-ion battery capacity by 2020 and make them cheap enough to spark a mass uptake of EVs, the question is over the sourcing of minerals that will fuel this US manufacturing revolution.

Graphite, whether naturally mined or synthetically produced, is the largest input raw material into a battery. Even more so than lithium.

Tesla's plant alone could potentially require 140,000 tpa of natural  graphite and 25,000 tpa of lithium compounds, growing each market by 37% and 20% respectively.

Battery grade graphite comes in two forms: spherical and finely ground, pure powder.

Spherical graphite is the sought after grade for today's battery makers as it offers improved conductivity and performance to the battery.

The present tug of war is over whether the battery industry will go with natural or synthetic spherical graphite. At the moment the decision, for an industry which we estimate to have an output of 50,000 tpa worldwide, is split 60:40 in favour of natural graphite.

Nearly all natural spherical graphite is produced in an uncoated form in China.

Battery customers, who are predominately located in Japan, are not yet satisfied with the consistency of what is a relatively new product from China. Cost is also an issue and is strongly tied to the price of flake graphite, which has seen all-time highs in recent years.

China's production problems

As a recent Bloomberg Businessweek article outlined, China has its fair share of problems surrounding the sustainability of its flake graphite production.

The article forced Tesla Motors' CEO, Elon Musk, to respond on twitter: "the amount of graphite in our cars comes from Japan and is mined in a very clean way."

While China has a handful of larger scale, modern professional graphite producers, it also has a number of small, inefficient operations. Tracking which mine the graphite comes from is very difficult.

The country's graphite industry is fragmented with a handful of small to medium sized mines contributing to the country's output - 250,000 tpa in 2013, 60% of global supply. Heilongjiang, Shandong and Inner Mongolia are leading production hubs in China.

Pingdu in Shandong, which can be seen as the graphite capital of the province, came under fire from local media in December over graphite dust issues from the abundance of processors near the city. This sparked the government to enforce a blanket shut down and inspection of the industry, taking 60,000 tpa of flake graphite off the market.

Graphite dust is one of the major problems with graphite manufacturing in China, the majority of which has undergone little modernisation since the 1980s.

Similar environmental problems have also been seen in Heilongjiang - the world’s premier graphite producing region. Graphite rain was reported to have fallen over local towns, while poor processing practices have also affected surrounding agriculture and businesses.

The second major issue is the acids used to purify the spherical graphite to the high carbon levels required for battery customers. These can be hazardous to the environment if not disposed of properly, which has drawn the attention of local media and residents.

It is important to note that China does have a handful of large, modern graphite companies which would act as consolidation vehicles should the government choose to act in this way.

Another point to make clear is that while graphite dust can cause disruption, the mineral itself is inert and safe.

Nevertheless, China's flake graphite industry is in need of modernisation. The government is not happy with any mining that is inefficient, wasteful and polluting. One can turn to rare earths and phosphate rock for recent examples of this.

Some small graphite mines in China should have been shut down years ago. They are low grade and extraction is now at depth, which is increasing costs. The country can still produce it at the lowest cost in the world, but it relies strongly on the cheap raw material from Heilongjiang in the north.

Should the government switch focus from Shandong to Heilongjiang, the industry and the world would be facing a significant supply problem and large scale battery operations, like Tesla is planning, will begin to feel the impact of rising prices. 

Coming soon: IM Data’s Tesla supplement - how the world's first 'gigafactory' will impact raw material markets.              
Join the debate: IM discusses the full impact of Tesla’s news with industry experts – Watch out for further details.

Visit the mines: IM Data hosts its exclusive 2nd Chinese graphite field trip from 31st March - 4th April.

For further details contact Andy Miller, IM Data

For registrations and advertising contact Ismene Clarke, Advertising and Sponsorship Manager

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