Australian miner Syrah Resources says a deal to supply battery-ready graphite to Elon Musk’s Tesla could be the first step of a significant growth phase as the world’s biggest car makers accelerate efforts to secure essential electric-vehicle raw materials.
With the electric vehicle revolution set to drive a huge increase in demand for natural resources like nickel, lithium, cobalt and graphite in coming years, Melbourne-based Syrah signed a deal in December with Tesla to supply graphite needed to make the negative end of lithium-ion batteries, known as the anode.
From Tesla to Volkswagen, car companies across the globe will need an ever-growing supply of battery ingredients to accelerate the rollout of electric vehicles, but markets for many of the raw materials are deeply under-supplied.“If you look at the natural graphite market upstream today, the total global market is 1 million tonnes per annum … but by 2030, it will be somewhere between 3 and 4 million tonnes,” Syrah chief executive Shaun Verner told The Age and the Herald.
“The demand growth is such that security of long-term supply of raw materials and finished goods is absolutely critical for auto manufacturers and battery manufacturers to ensure they have a reliable supply chain in the future.”
Syrah’s deal with Tesla, for an initial four years, will underpin the company’s plans to expand its plant in the United States, which processes graphite mined in Mozambique into anode material. Syrah’s board is aiming to make a final investment decision within weeks on boosting the plant’s capacity to 10,000 tonnes a year.
Aside from Tesla, Mr Verner said Syrah had experienced a surge in interest across the past 12 months from battery makers and other auto manufacturers seeking to lock in reliable long-term supplies of graphite, meaning additional expansion plans for both the Louisiana facility and Mozambique mine may be on the horizon “sooner rather than later”.
“We’ve been engaged with a number of potential customers for multiple years, but really the last 12 months have seen a significant escalation of commercial discussions,” he said.
“We’ve been really clear, this first 10,000-tonne capacity facility is very much a first step.”
With China accounting for an estimated 85 per cent of anode material globally, there is an increasing focus among the EV sector and world governments on developing local supply chains, including in the US.
Commodity price reporting agency Fastmarkets said rising costs and tighter supply in China had driven graphite prices higher in December.
“Numerous challenges are ahead for the graphite industry as it develops to meet the needs of the rapidly growing EV sector,” Fastmarkets said. “In the coming years, exponential growth from the EV sector will propel the industry’s graphite requirement far above demand from traditional consuming sectors.”
Although electric vehicles still account for just 3 per cent of new sales today, their uptake is building strongly in China, the US and Europe. Car makers worldwide are expanding their electric vehicle lines while governments are setting deadlines to phase out petrol-engine vehicles and unleashing huge stimulus packages targeting transport electrification.
Analysts are now projecting EVs will account for 40 per cent of vehicle sales by 2030, fuelling a five-fold rise in demand for supplies of some raw materials.