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
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
Graphite, whether naturally mined or synthetically produced,
is the largest input raw material into a battery. Even more so
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
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
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 worlds 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
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
soon: IM Datas Tesla supplement - how the world's first
'gigafactory' will impact raw material
the debate: IM discusses the full impact of Teslas news
with industry experts Watch out for further
the mines: IM Data hosts its exclusive 2nd
graphite field trip from 31st March - 4th
further details contact Andy Miller, IM
registrations and advertising contact Ismene Clarke, Advertising and