The $3-trillion EV market needs batteries that are 20-30% graphite–a material the U.S. currently doesn’t produce at all. That makes graphite a matter of national security in the global energy race.
Each EV battery requires not only lithium–a metal that investors are very interested in–but even more graphite, the metal that prevents the lithium batteries from breaking down. Yet, the U.S. hasn’t produced any graphite for decades.
Now, with the EV market starting to explode, and automakers and battery manufacturers expected to consume far more than ever, we’re looking at a nightmarish graphite supply chain that is mostly dependent on China–but not necessarily on the Chinese.
Currently, China is one of the few countries with graphite processing facilities, but one of the leading producers in the world is an international company with both a North American technology and production arm and wholly owned Chinese subsidiaries and expert team operating since 2008. And it’s parked right next to the largest graphite mine in the world, in China allowing it to secure this critical supply today while growing with the explosive demand of tomorrow.
The company is Graphex Group Ltd (GRFXY, 6128.HK), and we think it’s one of the key companies set to benefit from a graphite market that is expected to continue towards a valuation of $22 billion and which Benchmark Mineral Intelligence predicts will be in shortage by the New Year.
Our Pick For The Most Compelling Graphite Story
Both the United States and the European Union have now declared graphite a “supply critical mineral”. Over 70% of all graphite is produced in China. And even that output may be uncertain as gigafactory demand dictates a supply crunch. China remains dominant and even got a boost from the COVID-19 pandemic, which saw it very quickly recover from production facility closures, ensuring that the supply chain did not see any real diversification.
Most of these battery manufacturers are Asian, so whether they are made in Korea or Japan, much of the graphite originates or is processed in China. From there, it either gets further processed in China or it moves to South Korea or Japan for Panasonic or LG, for instance, which make certain parts of the battery.
American EV sales are expected to come in at 450,000 for 2021. Year-to-date sales through November were up 88% compared to 2020, and the New Year is gearing up for an even bigger surge as new models flood the marketplace. AutoPacific forecasts EV sales at 650,000 next year, for another 45% increase.
Globally, the numbers are even more impressive. EV sales more than doubled in 2021, even as overall car sales dropped under pandemic pressure.
Giant Ford (NYSE:F) plans to produce up to 600,000 EVs a year globally by the end of 2023. That is already twice what it originally intended. Ford’s F-150 pickup truck broke sales records, and the automaker is now gearing up to build three battery factories and an electric truck plant. By 2025, we expect to see an astounding 13 new battery gigafactories coming to the U.S. alone.
Considering that there is more graphite in an EV battery than there is lithium, we’re anticipating a major demand surge for this “supply critical mineral”.
For this battery material, it’s all about processing, and it’s not a market to easily entertain newcomers. The barrier to entry is technologically very high.
Electric Vehicle Producers Are Set To Grow In The Coming Years
Due in part to a massive influx of millennial money and the multi-trillion-dollar green energy boom, Tesla Inc. (NASDAQ:TSLA) is still the king of EVs in America. The company accounts for the majority of total EV sales in the country and just broke another production and delivery record last quarter. But legacy carmakers are pouring billions into EVs, and hundreds of new models are coming to the market.
“It’s no surprise that Tesla’s still dominating electric vehicle sales because they’re the only ones that really have viable products in full swing,” IHS Markit associate director Michael Fiske told CNBC.
Nio Limited (NYSE:NIO) is one of Tesla’s most exciting new competitors, especially as China looks to grow its domestic market. After a rough start after going public in 2018, it’s been on a tear, producing vehicles with record-breaking range. And it’s showing no signs of slowing.
Nio has made all the right moves over the past year to turn heads on the streets and in the marketplace… From its stunningly beautiful – and fast – EP9 supercar to its new line of family-friendly high-performance sedans, Nio is well on its way to retaking control of its local market from Elon Musk’s electric vehicle giant.
Recently, General Motors (NYSE:GM) dropped a bomb on the market with the announcement of its new business unit, BrightDrop. The company is looking to capture a key share of the burgeoning delivery market, with plans to sell electric vans and services to commercial delivery companies.
GM isn’t just betting big on EVs, either. It’s also looking to capitalize on the autonomous vehicle boom. Recently, it announced that it’s a majority-owned subsidiary, Cruise, has just received approval from the California DMV to test its autonomous vehicles without a driver. And while they’re not the first to receive such an approval, it’s still huge news for GM.
Cruise CEO Dan Ammann wrote in a Medium post, “Before the end of the year, we’ll be sending cars out onto the streets of SF — without gasoline and without anyone at the wheel.”
Ford (NYSE:F) is another old-school automaker taking the dive into greener waters. In addition to brand-new electric versions of its best-sellers, the F-150 and iconic Mustang, it’s also carving out its own position in the hydrogen race, as well. In fact, it recently even unveiled the world’s first-ever fuel cell hybrid plugin electric vehicle, the Ford Edge HySeries.
Ford became the best-performing auto industry stock last year, beating investor favorite Tesla as it doubled down on an all-electric future. 2021 was “truly a breakthrough year for Ford … easily the most important year strategically for the company since the financial crisis,” Morgan Stanley analyst Adam Jonas told CNBC.
This is an extract of the original “Could A Graphite Shortage Derail The $3 Trillion EV Boom” article first appeared on http://oilprice.com/
