EDITOR: | December 22nd, 2014 | 10 Comments

Tesla and competitors to place pressure on global graphite demand for Li-ion manufacturing facilities in 2015

| December 22, 2014 | 10 Comments
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This last month and a half has been rather lacklustre for the graphite sector as a whole but the demand and prospects for this material should improve noticeably in 2015. When considering the market for graphite it is important to note the main reason for its demand. Graphite contains carbon, which is the element that gives a diamond its strength. It is the strongest material in the world, yet it is also and soft and malleable at the natural flake graphite state. Carbon also makes graphite extremely heat resistant, electrically and thermally conductive, chemically inert and lighter than aluminum. These characteristics are what make graphite so important – and this is before graphene even remotely enters the discussion. Moreover, carbon and graphite materials play an important role in traditional production processes while serving as one of the very bases of future technologies. Graphite electrodes are essential components in the world’s largest single recycling process, which is the melting of scrap metal to make steel while coarse-grain graphite cathodes are used in the aluminum production process and furnace linings.

Higher grade flake graphite is needed to produce anodes, one of the key components of lithium-ion batteries, used anywhere from a Toyota Prius to a Boeing 787 airliner. Fuel cells also contain carbon in the form of gas diffusion layers. High purity graphite also finds its way into solar cells and semiconductor layers for LED manufacturing. And then there is that whole other graphite side related to the rise in demand for a new generation of lightweight materials: composite materials based on carbon fibers. Carbon fibers have a diameter of only one-tenth the thickness of a human hair, but are extremely strong; they are woven in a textile fashion and mixed with a polymer matrix, hardened form carbon fiber composite materials that are strong as steel but much lighter. They are increasingly being used in cars while they have started to replace aluminum in aerospace – the Boeing 787 and Airbus 350X, two of the most advanced jetliners in the world, make extensive use of carbon fiber enhanced plastics. Graphite is also corrosion-resistant, which makes this material an ideal replacement and cost saving alternative to the use of steel reinforcement in the construction industry (and of course graphite is both a component of steel alloys and a refractory agent in its manufacturing process).

The graphite market will be ever more competitive market and one of this year’s protagonists was Tesla Motors, an emerging and popular California based electric vehicle manufacturer. In February 2014, Tesla announced that it would build a factory to produce lithium-ion (Li-ion) batteries, with a projected USD$ 5 billion investment; the so-called ‘Gigafactory’ could increase graphite demand by more than 30% in 2020. Tesla wants to secure a North American natural graphite source, which provided one of the more exciting aspects of following the graphite market in 2014, as speculation started to build as to which potential producer tesla would use.  Tesla’s influence in the graphite market should be rather intense in 2015 because CEO, Elon Musk, delivered a series of announcements indicating that the Gigafactory project would be ready ahead of schedule.

In 2015, Tesla will be driven to sign agreements with the mining and metallurgical companies involved in the production of graphite. Moreover, Tesla’s competitors such as LG Chem or Foxconn Technologies and Hitachi will be launching their own Li-ion manufacturing facilities, which are likely to be based in China, where there is concern that the availability of its home sourced graphite could start to decline because of growing environmental and regulatory changes to the mining industry being imposed by Beijing. In early 2014, graphite production in China was brought to a halt for environmental reasons. Although the production cuts have not yet translated to an increase in graphite’s market value, this is a matter of time because the concern now is graphite supply might be unable to address world demand in the near future. There should also be rising demand in more basic graphite markets such as refractories because one of the effects of lower oil prices would be increased consumer demand and rising Chinese and European manufacturing, prompting more steel production. Graphene, directly related to flake graphite, will continue development and serve as a reminder of graphite’s potential. It is unclear what effects the lower oil prices will have on the world economy. Many, and myself included, see the development as favorable for stimulating consumer demand and manufacturing in the rich countries.

History has provided some clues to this effect. In 1986, oil prices were halved almost overnight after OPEC chose not to control supply, triggering a global economic surge that accelerated global growth to a peak of 4.6 per cent in 1988, a rate that would not be achieved again until 2000. Though a boost to global industry is desirable, there are no guarantees that cheap oil will perform an economic miracle but there is some optimism in the iron ore sector, which is good for graphite.  The economy of Australia, the largest exporter of iron ore in the world, suffered a severe blow from the crisis in the market for iron ore and the same national currency, the Australian dollar was dragged down. However, there are well-founded hopes that during 2015 the consumption of ferro-alloys and special steels will be reflected in better performing market given that the automotive industry has seen an increase in demand that is expected to continue throughout 2015, aided by the fall in oil prices.


Editor:


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Comments

  • Allan Wing

    Agreed 2014 was not a positive year for those owning shares in the graphite sector. Also I believe 2015 will be the turnaround year leading to respect in the graphite space. It could also be a year in both consolidation and failures of the weaker players. As much as the demand is growing for graphite the number of mines need would only be a handful.

    December 23, 2014 - 6:54 AM

  • Thomas Anthony

    How does one figure ouf which companies to be invested in..I have my eye on three graphite companies..two with connections to companies that are trying to get a foothold in the graphene industry..Focus fcsmf and Lomiko lmrmf. .I also like Saint Jean because of the possibility ofmining graphite from Sri Lanka..on of the rareset types and most expensive types of graphite, VEIN..this is all new to me and I would appreciate any pointers from those with experience in the graphite mining industry..thanks in advance, and have a very happ holiday.

    December 23, 2014 - 11:26 PM

  • Allan Wing

    Grafoid, a partner of Focus Graphite is miles ahead of trying to get a foothold in the graphene space. They’ve been mentioned many times along side of the multi nationals involved in research and development in the graphene space. Grafoid has a major research and development presence in Kingston. They have 2 manufacturing locations in the world, Kingston and Singapore. They can make is at a very high quality, low cost, unlike any other, to suit the need. Take a look at their web page.

    December 24, 2014 - 6:22 AM

    • Tracy Weslosky

      Allan. You have been a delight and a real enhancement to read on InvestorIntel this year. Intelligent commentary and clearly you read and research, would like to draw other commentators attention to how one should comment — towards enhancing the conversation. I too have followed the GRAFOID story for the last couple of years, and they are the ones responsible for me falling in love with graphene. Yes, they are light years ahead of the competition, and I look forward to what they do in 2015….but undoubtedly it will involve enhancing the greentech revolution. Kudos Grafoid.

      December 26, 2014 - 12:54 PM

  • Thomas Anthony

    Hello Allen, I enjoyed reading your post on Grafoid..I have been following Focus graphite and am an investor with the company. .as for Grafoid, I was unaware of the company when they offered their first private placement @ .50..now they are offering a second placent this time at 10x the first price $5..what a conundrum. Should I invest that ammount in Focus @ .40 being they own a 20% stake in Grafoid, or should I diversify my holdings and just invest in this private placement. I heard that when Grafoid decides to become a publicly traded company, it is their desire to be listed on one of the big boards and not the QX or another OTC tier. If and when Grafoid becomes public, I believe it will be more reconized by the public and could have graphene projects already under development. The future looks bright for both Focus and Grafoid through 2015 and beyond. I have to ] ut some serious thought how to take advantage of both companies as a new investor in the graphite/graphene sector..hopefully investorintel will be putting out more articles on the two companies in the near future

    December 27, 2014 - 4:55 AM

  • Allan Wing

    Stria Lithium is part of the Focus Graphite, Grafoid triple play in the green movement towards the future in battery technology and many other areas. Stria is well worth taking a look at.

    December 27, 2014 - 8:00 PM

  • Allan Wing

    Tracy
    2015 should prove to be a year unlike any other for Grafoid. Their business plan from the beginning has been brilliant. Some have tried to be like them, but for one thing, the Mesograph (grapheme) Grafoid offers is the real deal.

    December 27, 2014 - 8:04 PM

  • John Ferrier

    Does anyone know if ultra high grade anthracite (ie carbon content between 90-94%) can substitute for graphite?

    February 13, 2015 - 12:11 AM

  • Islay

    Hi John,

    Anthracite is often used as a recarburiser for lower grade steel production, and for some cast iron. The high ash content, and often high sulfur, limits use in premium products. If graphite companies can keep their costs down to those currently projected, then the recarburiser market could become a big thing for them, replacing high-grade petroleum coke.

    May 30, 2015 - 11:27 PM

  • Michael Gundry

    ASX-MNS
    99.2% purity from simply flotation. No chemical treatment however can reach 99.8% purity with low chemical treatment.

    October 8, 2015 - 11:58 PM

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