“There are reputational issues surrounding graphite processing, as well as cobalt,” Panayi said at Fastmarkets’ Battery Materials Europe 2019 conference in Amsterdam, September 26-27. “The leaching process of natural flake graphite can pose problems if it is not managed properly.”
The processing of raw graphite flake requires chemical leaching to produce battery anode grade graphite. The chemicals used in this purification process carry the risk of environmental damage if their disposal is not handled appropriately.
“Given that the most significant proportion of supply comes from relatively small [market participants] in China, [where controls can be lax,] there can also be issues around safety conditions,” Panayi said on the sidelines of the Amsterdam event.
There have been environmental inspections in China in recent years which have resulted in a tightening of production processes. This has increased costs for the expandable graphite market, which was expected to grow by 5% per year for the next 10 years.
Most of the processing takes place in China and there remained little production elsewhere. But some companies, such as Tirupati Graphite, were ramping up their production of expandable graphite in response to the growing demand.
Companies that manufacture car parts, known collectively as original equipment manufacturers (OEMs), must be able to demonstrate that they source their materials responsibly. This was particularly the case for end-products that were marketed as sustainable, such as electric vehicles.
“OEMs will attempt to source from the most reputable companies there are,” Panayi said. “This may limit supply choices over time, which may affect prices.”
The battery sector uses both synthetic and natural graphite flake in a ratio of about 60:40. Producers of both sources of material will continue to vie for liquidity while the market develops.
While the reputational risks were currently higher for processed natural graphite, there were also issues concerning synthetic material.
“The production of synthetic graphite is energy-intensive so it has a large carbon footprint,” Panayi said.
Concern about reputational risks in the battery sector has most closely been associated with artisanal mining for cobalt in the Democratic Republic of Congo.
The acquisition of processed graphite represents a potential reputational risk for participants in the battery sector, according to Adam Panayi, managing director of battery analyst RHO Motion.