TORONTO (miningweekly.com) – US automotive giant Tesla had recently revealed plans to build a new $5-billion lithium-ion battery ‘gigafactory’ that could potentially increase natural graphite demand by up to 37% by 2020, according to UK-based analyst Industrial Minerals Data (IM Data) manager Simon Moores.
The factory, which is forecast to start production by 2017, is expecting to have an output of 35 GWh/y by as early as 2020, which would more than double the size of the current market.
In a recent IM Data publication co-authored by Moores and Andy Miller, the analysts stressed that the plant was in the planning stage and capacities still depended strongly on market demand, but Tesla believed it could be the market leader by producing low-cost batteries in the US.
Talking to Mining Weekly Online during the recent Prospectors and Developers Association of Canada international convention, Moores said that while he believed the large-mesh flake graphite market was currently more or less in balance, there could be a supply crunch looming as the world economy slowly started to recover from the Great Recession.
IM Data had calculated that Tesla's plant - which is set to be based in the south-west US - would consume at least 28 000 t of spherical graphite every year if operating at capacity, which equated to about 93 000 t of flake graphite if produced to today's standards that entail raw material wastage of up to 70%.
“If achieved, battery demand for natural graphite will increase 112% from today's levels of 83 000 t/y. This is assuming no other growth in regions such as Asia, which is today's primary consuming region,” he said.
While research and development firms have been actively exploring non-graphitic carbon anode alternatives, the position of graphite anodes as the current material of choice for lithium-ion battery producers means the graphite industry is likely to be the beneficiary of this growth, the analysts wrote.
Whether Tesla plans to use spherical graphite - made from large natural flake graphite – or synthetic materials remains unclear.
Nonetheless, expansion of the battery market for electric vehicles (EVs) on this scale presents a valuable opportunity to graphite suppliers.
OVERNIGHT EV BOOM
Moores said that as soon as the EV market started gaining traction in 2011, it boomed overnight, prompting several juniors to move graphite projects up the value chain. However, there are no new mines expected to come on line this year, which, combined with potentially fluctuating supplies from the world’s leading producer, China, could result in rising prices.
In 2012, consumption from the battery sector constituted 8% of global natural graphite demand.
For the natural graphite market to supply the type of market growth Tesla is forecasting, large flake graphite output would need to increase significantly over the coming years.
IM Data estimates that large flake grades (+80 mesh and larger) only made up just more than 20% of total flake graphite output of 375 000 t in 2013, and with competition for these grades from other traditional markets, such as the refractories sector, new projects were likely to be required to meet the battery market demand.
“A number of junior projects were aiming to reach production over the coming two to three years, many boasting large flake reserves capable of supplying new hi-tech markets. With China’s large flake reserves depleting, and the efficiency of the country’s spherodisation process under question, these projects have an opportunity to play a major role in supplying emerging markets,” Moores said.
Tesla’s rapid EV expansion plans, however, are centred around lowering lithium-ion battery costs by more than 30% per kilowatt hour, which would allow the company to bring a more price-competitive product to market.
“Raw material costs are, therefore, likely to be under close scrutiny as the company gears up for production, meaning any potential graphite suppliers will have to be competitive not only with other producers, but also alternative carbon anode companies,” said Moores.
The ‘free-on-board’ price of Chinese uncoated spherical graphite, 99.95% carbon at 15 microns currently stood at $3 400/t, while prices of coated spherical graphite – the final material used in battery anodes – was valued at around three times this level.
There are several new graphite-mining projects in development in the medium term, among which are the 20 000 t/y large-flake, high-purity Bissett Creek graphite project, in Ontario; private project developer Ontario Graphite’s Kearney large-flake, high-carbon graphite mine, also in Ontario; Energizer Resources’ Molo graphite project, which is being developed as part of the Green Giant graphite project in Madagascar; and Focus Graphite’s high-grade Lac Knife graphite resource, located 27 km south-west of Fermont, Quebec.