S&P Global Commodities Insights predicts that sales of EVs will increase by a compounded growth rate of more than 28% over this period. As a consequence, battery materials have rapidly become critical to the vehicle supply chain with major companies setting up partnerships with battery cell manufacturers and raw material miners. One of the leading producers of EVs, Tesla, has reportedly been in touch with BHP for nickel sulphate, Albermarle for lithium hydroxide, Glencore for cobalt, and Syrah Resources for graphite flake.
Cobalt, Lithium, and Nickel – three of the leading building materials for cathodes – were the priority for car manufacturers in 2022. However, despite an evident demand, all three metals are struggling with supply chain issues.
Cathode chemistry used in long-range EVs has shifted to higher nickel composition cathodes. In fact, current technologies like NMC811 cathode chemistry (8 Nickel to 1 Manganese and 1 Cobalt) are forecast to capture an important battery market share in the future.
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LFP Cathodes (Lithium-Iron-Phosphate) will continue to be in high demand for the battery industry but have a lower energy density thereby making them more suitable for vehicles in urban settings and for energy storage.
In 2022, the costs for battery-grade metals for all chemistry types increased tremendously due to the impact of supply issues on raw material availability. The level of NMC811 cathode has doubled as compared to 2021. This figure is based on the Chinese Spot assessment.
Lithium has been the essential driver of this trend and has stayed over 6 times its 2021 levels. Nickel and cobalt also peaked in March 2022 before plateauing and eventually subsiding. The cost breakdown for NMC811 in July 2022 was estimated at $40.8 per kWh for Lithium, $3.5/per kWh for Cobalt, and $15.9/per kWh for Nickel.
Even though graphite is the only commercially proven anode material, disruptions in its supply chain did not make it to the headlines in the same fashion. Silicone, on the other hand, shows significant promise as an alternative future anode material. It exhibits 10 times higher energy density as compared to graphite. However, commercial application in the short term remains limited due to technological constraints.
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Long-range car batteries need high-performance graphite anodes which come from a few leading firms like LG, Hitachi, and Samsung. With an average battery-grade graphite input requirement of 1.2kt/GWh and a cost of up to $12,000/ton, this represents a high-end cost of $14.4/kWh. Compared with the cost of cathode metal for NMC811 in June 2022, graphite is behind nickel and 4 times the cost versus cobalt.
The supply of graphite has to be addressed to meet the needs of this sector. The growing trend of diversification of supply chains to mitigate risk will strengthen investments outside of China on this front. Investors and consumers are increasingly interested in projects in Africa. However, the success of these projects is dependent on unique resource attributes.
Graphite anodes can be sourced through the mining of raw materials. This is known as natural graphite. Synthetic graphite, on the other hand, is produced from crude oil. It is the latter which dominates the market.
On this front, it is important to note that the performance of natural graphite is better and new production of the same is expected to take over by 2025. This can be attributed to the fact that processing synthetic graphite is tedious and requires carbon enrichment – or Coking – at 450⁰C and purification into a solid state at 13,000⁰C. Preparation from natural graphite requires 3x less energy in comparison to synthetic graphite.
Africa contributed 9% of the world’s graphite supply in 2021. Balama in Mozambique is the largest mine and is owned by the Australia-based Syrah Resources. In 2017, the continent only had a few small operations located in Namibia and Madagascar. Balama turned things around as it was the largest facility in the world for graphite reserve tonnage, the highest graphite grade, and graphite capacity (targeting 313 kt/yr). Production hit 100 kt in 2018 and 153kt in 2019 but eventually struggled.
Production at Balama came to a halt in 2020 due to the pandemic. Militia attacks in the region have also affected the once-leading producer of graphite in 2021 and the first three quarters of 2022.
Balama has one of the highest Total Graphitic Carbon Reserve Grades of most new African projects, achieving over 15%TGC (Africa average: 4.2-9.9%TGC).
Amongst other notable African graphite, the oldest is Aukam in Namibia which has been operating since 1940-74 and is now owned by Canadian-based Gratomic who forecast production to restart in 2023 (22kt/yr capacity). Graphmada in Madagascar is owned by Australia-based Greenwing Resources which currently has the mine on Care & Maintenance for expansion work to complete (40kt/yr capacity).
Tirupati Graphite – a UK-based firm – acquired two assets in Madagascar and commissioned their first 3kt/yr plant in 2019, Sahamamy (84kt/yr capacity) & Votamina (60 kt/yr capacity). Other projects are under construction or in late-stage feasibility studies and have the potential to put Africa on the map of being one of the leading producers of graphite by 2026.
Manufacturers of EVs depend on the rapid global growth of Natural Graphite to achieve their ambitious targets for long-range EVs. Africa will be the fastest-growing region for supply outside of China as the continent has several projects that show the potential to deliver high-quality graphite to the battery and high-technology sectors.
Limited market transparency and supply chain complexity creates a risk that constricts funding for developers who are already suffering from other risk factors in the region. These issues must be overcome so that graphite production can meet global demand.