2024 Graphite Outlook Report
Graphite is a top sourcing concern for the battery metals sector. Could demand surge in 2024? The Investing News Network spoke with analysts, market watchers and insiders to get their best predictions and stocks you need to keep an eye on.
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A Sneak Peek At What The Insiders Are Saying about Lithium
“Natural and synthetic supply from existing graphite producers, together with ramp ups in new-built synthetic graphite capacity in China and natural graphite projects in Africa, should keep the market in balance in 2024."
— Dr. Nils Backeberg, Project Blue
"When we think about raw materials, graphite is actually the largest component by weight compared to any other battery raw material, so each gigawatt hour or megawatt hour of capacity that's deployed has a big impact on graphite."
— Caspar Rawles, Benchmark Mineral Intelligence
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Table of Contents
Graphite Market Forecast: Top Trends That Will Affect Graphite in 2024
Graphite Market Update: H1 2024 in Review
Top 3 Canadian Graphite Stocks in 2024
Graphite Market Forecast: Top Trends That Will Affect Graphite in 2024
What's ahead for the graphite market in 2024? Read on to learn more about what analysts expect for the year.
Graphite is a critical raw material in electric vehicle (EV) batteries, and as EVs gain a stronger foothold in the global auto market, demand for the battery metal is projected to surge.
Built into the anode, graphite is one of the most important elements in any EV battery, with each one containing between 50 and 100 kilograms of the material. While both synthetic and natural graphite are used in battery anode applications, synthetic dominates the market. However, in recent years, end users outside of China have begun to prefer mixing more natural graphite with synthetic in their chemistries in an effort to lower emissions and meet tighter ESG standards.
According to Benchmark Minerals Intelligence, “Synthetic graphite anode production can be over four times more carbon intensive than natural graphite anode production, due to its use of energy and fossil fuels as a feedstock.”
Here the Investing News Network (INN) looks at key graphite market trends in 2023 and the graphite forecast for 2024.
How did graphite perform in 2023?
This past year has added yet another chapter to the tale of two graphites. A number of factors that began brewing in 2022 converged on each other in 2023 to bring about lower prices for both synthetic and natural graphite.
When it comes to EVs, all roads lead to China, which is the world's number one producer and consumer of graphite by a margin that's nearly as wide as the country’s Yarlung Zangbo Grand Canyon. In 2022, China produced 850,000 metric tons (MT) of the commodity, accounting for an impressive 65 percent of the world’s mine supply. The Asian nation also controls as much as 80 percent of the world’s synthetic graphite production.
Rising synthetic graphite costs and growing demand for EVs led Chinese synthetic graphite producers to ramp up their output capacity in 2022. According to Fastmarkets, “graphitization capacity in China more than doubled to more than 2.3 million tonnes in December 2022 from 1 million tonnes in March 2022." By May 2023, this increased capacity had lowered the cost of production for synthetic graphite by 60 percent off its 2022 peak.
Unfortunately, EV sales growth in China and abroad began to lose momentum in early 2023 alongside a global economic slowdown, resulting in less downstream demand, a growing inventory surplus and lower prices for synthetic graphite. Adding to the overhang was reduced demand for graphite electrodes in electric-arc furnaces from China’s steel sector.
Falling prices and rising supply of synthetic material has also pushed down prices for natural graphite anode material, in turn erasing its price competitiveness over synthetic. Whereas natural graphite was half the price of synthetic graphite in mid-2022, by April 2023 that gap had significantly narrowed to a mere 5 percent.
According to Fastmarkets battery materials research analysts Georgi Georgiev, “The combination of graphitization overcapacity, declining coke prices and weaker-than-expected demand from the EV sector has led prices for synthetic active anode material (AAM) to decrease significantly, with the price differential between synthetic and natural-based AAM narrowing to previously unseen levels.”
What is the graphite supply and demand forecast for 2024?
Moving into 2024, China will continue to play a large role in shaping supply-side factors, although new Africa-based graphite mines are expected to bring fresh supply to the market.
“Natural and synthetic supply from existing graphite producers, together with ramp ups in new-built synthetic graphite capacity in China and natural graphite projects in Africa, should keep the market in balance in 2024,” Dr. Nils Backeberg, co-founder and director of market intelligence firm Project Blue, told INN via email.
Chinese producers are expected to keep ramping up battery anode material capacity, with an increased focus on synthetic graphite. “China invested heavily in new capacity following supply chain bottlenecks in 2022, and we expect the impact of this to continue to be felt in 2024,” explained James Willoughby, senior analyst at Wood Mackenzie.
As for spherical graphite, Willoughby said that several new producers in China are on track to begin processing in 2024. Outside of China, a number of other companies are also gearing up for production. “However, funding has been challenging in recent months and so some of these may be delayed into 2025,” he added.
Backeberg sees prices for synthetic graphite continuing to put downward pressure on spherical graphite prices (natural graphite anode material), further eroding spherical graphite premiums.
On the demand side, both Willoughby and Backeberg said their firms see continued strong growth for both natural and synthetic graphite from the EV market compared to a more modest outlook for traditional graphite applications in the steel industry, such as graphite electrodes, refractories and castings.
Synthetic graphite demand is expected to continue to outpace natural graphite demand in the year ahead. “The market for synthetic graphite has historically been much larger than natural graphite due to the significant graphite electrode sector, which does not use any natural graphite,” said Willoughby. “This will continue to be the case in 2024, with synthetic graphite consumption at 3.04 (million MT) and natural graphite at 1.68 (million MT).”
Backeberg sees a boost in demand for synthetic graphite coming from the Chinese government’s recent “Work Plan for Steady Growth of the Iron and Steel Industry,” which promotes the expansion of steel production with electric-arc furnaces under the latest capacity replacement policy. Additionally, he sees opportunity in the battery sector as anode material producers are also increasing capacity for integrated production of synthetic graphite.
When it comes to natural graphite demand, strong growth is expected from outside of China in 2024, especially as other players in the market seek to establish ex-China graphite supply chains. “Ex-China anode manufacturers are still keen on natural graphite due to its lower carbon emissions, and will be looking to tie up agreements in order to diversify their supply chains away from China, particularly given the recent announcement of export licenses,” said Willoughby.
In October 2023, China announced new export restrictions on certain graphite products. These took effect on December 1, 2023, and require Chinese exporters to apply for special permits to ship the material to global markets.
“The graphite controls are not specifically targeted at either bloc but are instead country-agnostic, meaning they could impact any of the country’s top customers, such as Japan, the United States, India, and South Korea,” according to the Center for Strategic and International Studies.
What factors will move the graphite market in 2024?
A major graphite sector trend for investors to watch is how other nations and graphite end users react to China’s new export restrictions. “During 2023, we have already seen graphite companies securing funding from US and EU government initiatives to develop their mine projects and battery-grade anode material plants to develop supply chains outside China,” explained Backeberg. He believes this activity is likely to continue in 2024.
The announcement has already prompted anode producers in Japan and South Korea, which are highly dependent on Chinese graphite imports, to consider stockpiling the material in the short term to meet customer demand while they wait for export license approvals. “Therefore, in 2024, end users will try to diversify their supply chains where possible, and if reliant on Chinese material will stockpile and try to secure graphite supply agreements,” said Backeberg. “However, it is not something that will affect the graphite supply chain in the short term in 2024.”
As North American and European governments move more aggressively toward decarbonization, investors can expect to see increased ally-shoring efforts to establish ex-China graphite supply chains for EV batteries in 2024 and beyond.
Willoughby said investors may want to look out for more updates on the EU's Critical Raw Materials Act; project funding news from the Canadian Critical Minerals Infrastructure Fund; and further clarifications on the US Inflation Reduction Act's "foreign entity of concern" clause. However, on this last point, he underscored that Wood Mackenzie is “watching the upcoming election in the US with interest as this could flip the narrative in the country, depending on the outcome.”
When it comes to advancements in battery anode chemistries, Willoughby expects to see a ramp up in production capacity for silicon-carbon (Si/C) composites in China for 2024. “The addition of these Si/C materials will increase battery range and increase charging speeds, appealing to a wider audience, especially in the west, where range anxiety can be a barrier to electric vehicle ownership.” While Si/C anodes do use less graphite, it’s still an early stage technology and is not expected to detract from the significant growth in graphite demand that is on the horizon in 2024.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: NextSource Materials is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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Graphite Market Update: H1 2024 in Review
What's happened to graphite so far in 2024, and what could the rest of the year bring? Read on to learn what analysts expect.
Battery metals like graphite are becoming increasingly important for their role in battery technologies.
Both synthetic and natural graphite, in the form of spherical graphite, are currently used in the anodes of lithium-ion batteries, an end-use segment that continues to consistently grow its market share.
Market watchers and analysts are optimistic about graphite's role in electric vehicle (EV) batteries for the foreseeable future; however, significant increases in supply out of China continue to keep prices for both types of graphite muted.
This trend continued during the first half of 2024 as graphite supply from China ballooned, adding headwinds to global prices for the battery metal and threatening capacity outside of the Asian nation.
During a graphite market overview, Georgi Georgiev, battery raw materials analyst at Fastmarkets, commented on China’s dominance in the space, saying that the country had a particularly strong role last year.
“China has been the main producer of natural graphite, especially in 2023. China accounts for almost 78 percent of the global supply for graphite, which in 2022 was different,” he explained.
“When the prices were going up, we were seeing more supply from Africa. But with the price collapsing at the end of 2022 and throughout 2023, we saw less supply coming from African projects and more supply coming from China.”
Indeed, China's graphite output has exploded from 762,000 metric tons (MT) in 2020 to 1.2 million MT in 2023. Most of its increased capacity is coming from state-owned companies and one region in particular, Heilongjiang province.
Altogether, as much as 94 percent of global graphite mine supply is coming out of the Asian country at the moment, with that number growing to 99 percent when looking at spherical graphite supply.
Chinese graphite production saturating market
Graphite prices have retreated and remained depressed with the rise of Chinese production of the battery metal, making it challenging for miners outside of China to keep their projects economically viable.
"It's been especially difficult for projects in North America, where we actually have only one operating mine,” said Georgiev. “And also for the graphite mines in Europe and in South America.”
Although margins are tight due to growing Chinese supply, Northern Graphite (TSXV:NGC,OTCQB:NGPHF), the operator of the Québec-based Lac des Iles (LDI) mine — currently North America's only graphite mine — reported record-setting sales volumes and revenues in its most recent quarterly results, which came out at the end of May.
“While we are pleased to be able to report record sales volumes and revenue in the first quarter amid strong demand from our customers that started in the second half of last year and has continued this year, clearly there is more work to be done to support our growth catalysts,” said CEO Hugues Jacquemin.
He went on to outline the company’s growth strategy, noting that production at LDI has been insufficient to sustain cashflow, requiring external financing and inventory sales. To address this, Northern Graphite is increasing LDI’s output to 25,000 MT per year to meet demand from EV sales, Chinese export controls and US tariffs.
As part of its ambitions, Northern Graphite launched the NGC Battery Materials Group in late January to advance its mine-to-battery strategy, becoming one of the few integrated developers of natural graphite outside China.
The group was formed by acquiring the assets and R&D team from Germany's Heraeus Group, including a state-of-the-art lab in Frankfurt. Northern Graphite also licensed Heraeus' Porocarb technology to enhance energy storage efficiency.
The NGC Battery Materials Group will focus on material analytics, electrochemical characterization and high-temperature processing, providing customized solutions to EV battery makers and OEMs. The group will also develop the 200,000 MT per year Baie-Comeau battery anode material facility, slated to start construction in 2026, pending financing.
According to Northern Graphite, the facility will be modular and tailored to OEMs and EV battery makers, focusing on graphite milling, shaping, classification, purification and coating.
This project and several in Africa will help diversify supply away from China over the longer term, said Georgiev.
Synthetic graphite supply growing thanks to China
The synthetic graphite market is also seeing significant impacts due to increased supply.
Enhanced graphitization capacity in China has led to a surplus of synthetic graphite, diminishing the sector's dependency on natural graphite. As a consequence, the utilization rate of synthetic graphite in battery anodes has risen to 85 to 90 percent, up from the usual 70 percent; meanwhile, natural graphite usage has lessened.
“Natural graphite anodes used to have the advantage of lower costs to offset the disadvantages, such as poor compatibility with electrolytes, poor cycling stability, faster decay, and battery swelling. But the cost-effectiveness of the natural graphite anodes for some low-end lithium-ion batteries is gradually decreasing with plunging, alongside tumbling synthetic anode prices,” Fastmarkets states in a report published in April.
In Europe and North America, the synthetic graphite market is largely controlled by petroleum producer Phillips 66 (NYSE:PSX), a global manufacturer of specialty coke, a precursor to synthetic graphite used in battery anodes.
As Georgiev explained, Phillips supplies the majority of European synthetic graphite demand and has 200,000 MT of capacity in the US. “Meaning that even if you tried to diversify supply away from Chinese suppliers, you end up with getting your supply from only one supplier outside, which is very complicated for the industry,” he said.
The process of creating synthetic graphite from specialty petroleum coke is energy intensive and complicated, Georgiev noted, adding that in the last five decades no new synthetic graphite producers have emerged.
“It is a very difficult process, it is very difficult to produce,” he said. “So it's very difficult to add new capacity.”
He went on to explain that some of the market’s production capacity relies on operations that are very old and tend to require long periods of maintenance, making their supply status precarious.
“For example, last year the (Humber) refinery Phillips 66 operates in England went (offline) for four months for maintenance, which took supply out of the market,” he said.
Graphite sector facing mounting geopolitical tensions
In addition to the usual supply and demand dynamics that move resource sector markets, graphite's status as a critical mineral has made it somewhat of a political pawn between China and the US.
In October 2023, China announced plans to impose new export restrictions on certain graphite products.
Chinese exporters were told that starting in December 2023, they would have to obtain permits to ship "high-purity, high-hardness and high-intensity synthetic graphite material and natural flake graphite and its products,” Reuters states.
To counter, in early May of this year, the Biden administration gave OEMs notice that they would be given two years to find suitable and sustainable sources of battery anode material, including graphite, outside of China.
Days later the US doubled down, announcing it would raise tariffs on foreign EVs and batteries.
“The tariff rate on natural graphite and permanent magnets will increase from zero to 25 percent in 2026,” the statement reads. “The tariff rate for certain other critical minerals will increase from zero to 25 percent in 2024.”
As Georgiev pointed, out the two year grace period was the result of North American OEMs that “stated and made it clear to the administration that there is no way to find alternative material now.”
“Actually, it’s very questionable whether sufficient alternative material will be available in 2027 as well,” he said.
While OEMs and Georgiev remain skeptical, Northern Graphite is optimistic.
“This is really good news for us as we extend the life and production capacity of our LDI mine in Québec this year and increase the availability of natural graphite for the North American market,” said Jacquemin. “We are executing on our main growth catalysts and preparing the company to be a key graphite supplier to industrial customers and Lithium-Ion battery makers as they turn to local production, and away from China, to fulfill their needs.”
It is estimated that the US imports 42 percent of its graphite supply from China.
Natural graphite substitution could widen imbalance
Prices for natural graphite could face more headwinds as demand shifts to the synthetic market.
Currently, the synthetic graphite market is pressuring the natural graphite sector due to increased use by anode producers, which are looking for lower costs and better performance.
As synthetic graphite has become more prevalent, it has come to account for 90 percent of the graphite used in lithium-ion battery anodes. Natural graphite products have also been negatively impacted by China's export controls.
These trends, coupled with oversupply and declining prices, have led to reduced demand for natural graphite, causing the market to struggle more compared to synthetic alternatives.
According to the International Energy Agency (IEA), battery demand for synthetic graphite has grown to represent 40 percent of supply, and is expected to balloon to 55 percent by 2040.
Like Georgiev and the OEMS, the IEA sees building graphite capacity outside of China as challenging.
In its Global Critical Metals Outlook, the agency highlights that projected supply of critical materials outside China is expected to fall significantly short of demand. While early stage projects in the US, Korea, Saudi Arabia, India, Norway and Finland could help bridge this gap, the anticipated supply is still likely to be insufficient to meet requirements.
“This indicates that achieving the diversification ambitions outlined in recent policy measures would be highly challenging without significant efforts to expedite the development of projects in geographically diverse regions,” the report reads.
“These projects would, however, need to move ahead amid strong competition from incumbent players and significant announced overcapacities in China, which may require strategic and co-ordinated support from governments.”
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
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3 Best-performing Canadian Graphite Stocks in 2024
Which graphite stocks have gained the most so far this year? These three companies on the TSX and TSXV are up the most year-to-date.
Graphite prices have experienced volatility recently due to bottlenecks in demand for electric vehicles.
One major factor experts are watching right now is China's export restrictions on certain graphite products. They took effect on December 1, 2023, and require Chinese exporters to apply for special permits to ship the material to global markets. This decision has had an impact on graphite prices this year, and will remain key going forward.
"Oversupply and increased competition from lower-priced synthetic graphite are likely to continue to put downward pressure on natural flake graphite prices over the next few years," according to Fastmarkets.
These dynamics will likely encourage the development of more ex-China graphite supply sources.
As Dr. Nils Backeberg, co-founder and director of market intelligence firm Project Blue, told the Investing News Network in December 2023, graphite-mining companies are already "securing funding from US and EU government initiatives to develop their mine projects and battery-grade anode material plants to develop supply chains outside China.”
Against that backdrop, many Canadian graphite stocks have trended downward in 2024. However, several graphite-focused companies have seen strong performances so far this year.
Below is a look at the year’s best-performing graphite stocks on the TSXV. TSX and CSE stocks were considered, but none made the cut. Data was obtained on July 16, 2024, using TradingView’s stock screener, and all companies listed had market caps above C$5 million at that time. Read on to learn more about their work this year.
1. Lomiko Metals (TSXV:LMR)
Company ProfileYear-to-date gain: 70 percent; market cap: C$13.49 million; share price: C$0.35
Exploration-stage resource company Lomiko Metals is working on the La Loutre large-flake graphite project as well as the Bourier lithium project, both located in Québec, Canada.
Shares of Lomiko traded mostly flat for much of the year, but a spate of positive newsflow generated by activity at La Loutre helped boost its share price to a year-to-date high of C$0.70 on May 28.
In April and May, the company announced testing results that demonstrate La Loutre's viability in supplying the EV battery anode market. “Lomiko has now successfully demonstrated the full value chain from ore to battery anode material on samples from the La Loutre project,” said Belinda Labatte, Lomiko CEO and interim chair of the board.
In other good news for the company and its shareholders, in mid-May Lomiko’s La Loutre project was awarded a US$8.35 million, or C$11.4 million, grant from the US Department of Defense as part of a Technology Investment Agreement, as well as C$4.9 million in funding from Natural Resources Canada.
2. Black Swan Graphene (TSXV:SWAN)
Company ProfileYear-to-date gain: 50 percent; market cap: C$20.33 million; share price: C$0.12
Black Swan Graphene describes itself as an emerging powerhouse in the bulk graphene business.
The company is a spinout of Mason Resources (TSXV:LLG,OTCQX:MGPHF), which owns the Uatnan graphite project in Québec, and holds a 39 percent stake in Black Swan. Graphite from Uatnan is used to supply Black Swan.
UK-based global chemicals manufacturer Thomas Swan & Co. holds a 15 percent interest in Black Swan, and brings a portfolio of patents and intellectual property related to graphene production. Through this partnership, Black Swan is building out a fully integrated supply chain from mine to graphene products.
Black Swan’s share price so far this year has benefited from the launch of a number of new graphene products, such as its GraphCore 01 family of graphene nanoplatelets products. Announced in April, these products include powders and polymer-ready masterbatches designed for the polymer industry.
Shares of Black Swan reached their highest year-to-date price of C$0.15 on June 19 following the announcement of a commercial partnership with advanced materials engineering company Graphene Composites. It will see Black Swan’s graphene used in the fabrication of GC Shield, a patented ballistic protection technology.
3. Ceylon Graphite (TSXV:CYL)
Company ProfileYear-to-date gain: 28.47 percent; market cap: C$7.48 million; current share price: C$0.045
Ceylon Graphite is an explorer and producer with a land package comprising 121 square kilometer grids containing historic vein graphite deposits in Sri Lanka, including the M1 graphite mine.
Ceylon plans to build a graphite processing plant at the M1 site to process the graphite to 99 percent purity, and supply anode material to the battery industry. Its license renewal for the site was delayed since last year following what it called “a series of changes in the licensing process, requirements and personnel.”
In May, the company had good news to report as the IML C license at M1 was finally renewed. Management said it would recommence graphite mining immediately. Ceylon’s shares reached a year-to-date peak of C$0.06 on June 6.
“The site is highly prolific with many large graphite veins,” Head of Mining Klaus Leiders said. “We are targeting a minimum of 200 tonnes per month from M1 once we have scaled and implemented efficiencies.”
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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