US IRA scheme spurs activity on multiple fronts in graphite anode sector

Graphite companies Nouveau Monde Graphite, Novonix and Westwater have all announced offtake agreements in a developing US anode supply chain to comply with that country’s generous subsidy scheme under the Inflation Reduction Act and to ease the current dependence on China for material, Fastmarkets heard on Thursday February 15

Graphite has an essential role in the manufacture of lithium-ion anodes and as a result has increasingly been affected by geopolitical positioning.

The Inflation Reduction Act (IRA) and China’s imposition of export controls on some graphite products have stimulated the development of an anode supply chain outside of China, as shown by several recent offtake agreements.

“The recent wave of binding offtake agreements, in combination with the commissioning of the Vidalia plant by Syrah [in the US state of Louisiana], are indicative of the significant stimulus brought by the IRA for building a local anode supply chain in North America,” Fastmarkets analyst Georgi Georgiev said.

The benefits and incentives of the IRA were intended to help localize the supply chains for batteries and battery materials in North America.

Most recently, natural graphite junior Nouveau Monde Graphite has agreed an active anode material (AAM) offtake agreement and an $87.5 million investment from Panasonic Energy, General Motors and other investors, the company said on February 15.

Under the multi-year agreement, Nouveau Monde, which is listed on the New York and Toronto Stock Exchanges, has committed to supply about 85%, 36,000 tonnes, of its phase-2 AAM production each year.

Additionally, lithium-ion battery maker Panasonic Energy and carmaker General Motors will invest $50 million in the development of Nouveau Monde’s phase-2 Matawinie graphite mine and Bécancour battery material plant in Canada, so that they meet their respective specifications.

Japanese conglomerate Mitsui and UK-based Pallinghurst will invest $37.5 million in repurchasing their previously announced convertible notes in Nouveau Monde.

“From Matawinie ore to Bécancour active anode material, to our clients’ US battery factories, we are pioneering a resilient supply chain for the electric vehilce [EV] market,” Nouveau Monde founder, president and chief executive officer Eric Desaulniers said.

Panasonic also active with Novonix

Earlier this month, Panasonic Energy announced that it had signed a binding offtake agreement with emerging US-based battery material producer Novonix.

Under the deal, Novonix will supply 10,000 tonnes per year of anode materials to Panasonic starting from 2025, for three years.

Novonix will produce synthetic graphite anode from its plant in the US, where Panasonic Energy will use the material in its battery manufacturing facilities.

The procurement deal is subject to Novonix achieving agreed construction milestones at its facility, where production was planned to begin at the end of this year. Full capacity was expected to ramp-up to 20,000 tpy of synthetic graphite.

Novonix and Panasonic emphasized that the agreement was designed to take advantage of the IRA scheme, which itself was intended to sidestep China’s current dominance of the EV battery market.

The East Asian country’s effective anode capacity reached 3.2 million tpy in 2023, against 1.79 million tpy in 2022, according to market sources.

Meanwhile, planned capacity outside of China was about 814,250 tpy, according to Fastmarkets’ estimates. This meant that China accounted for almost 95% of the graphite anode market.

SK On and Westwater

“It is not surprising that the agreements come at this time, after the introduction of graphite export controls in China and proposed FEOC rules under the IRA in December,” Georgiev said, “because both developments created great uncertainty over anode supplies to Western battery producers.”

A foreign entity of concern (FEOC), according to the US, is any foreign entity that is “owned by, controlled by or subject to the jurisdiction or direction of a government of a covered nation.” The countries that currently fall into this “covered nation” category are China, Russia, North Korea and Iran.

Companies such as SK On must avoid dealing with US FEOC companies in order to comply with the IRA framework.

SK On is a South Korean company with plants in US. It has set up an offtake agreement with Westwater Resources for AAM from the graphite plant it is now developing in the US.

Westwater reported on February 5 that the volumes to be supplied under the deal were expected to reach 10,000 tonnes in the final year of the agreement.

“This is the first offtake agreement for Westwater, and the company is actively negotiating additional offtake agreements with other customers,” Frank Bakker, Westwater’s president and CEO, said.

“We believe that the contract with SK On is also the first agreement for the supply of coated spherical graphite between a South Korean EV battery manufacturer and a US natural purified graphite producer,” he added.

“We believe that Westwater is well positioned as one of the first US-based suppliers of natural purified graphite for companies seeking an IRA-compliant source by 2025,” he said.

Graphite production development

A wave of synthetically produced anode material from China has flooded the market in recent years and weighed on prices across the graphite complex.

Development of an active graphite supply chain from raw material to anode material has been hampered by low prices.

Oversupplied and underpriced synthetic anode squeezed the market share of its natural graphite equivalent, adding pressure on producers of flake graphite, the feedstock for AAM, market participants told Fastmarkets.

In line with this downward trend, Fastmarkets’ price assessment for graphite flake, 94% C, -100 mesh, fob China, was $510-538 per tonne on February 8, down by 7.58% compared with $530-604 per tonne four months earlier on October 12.

“Despite the current weakness in graphite prices, we expect that guaranteeing security of anode supply chains would spur investment into the graphite sector over the coming months,” Georgiev said.

Syrah Resources has become the first vertically integrated natural graphite AAM producer outside China, with production from its Vidalia plant in Louisiana, the company said on February 9.

The plant has entered a ramping-up period intended to reach 80% of capacity for 11,250 tpy within six months, and to achieve full output within 18 months.

Syrah has an offtake agreement with electric car company Tesla, which will receive AAM for product qualification and approval from Vidalia.

Assuming that Syrah’s material passes the qualification process on May 31, 2025, Tesla will receive 8,000 tpy of AAM over a four-year period at fixed pricing.

Funding remains important to the development of a graphite supply chain outside of China.

Syrah, which is listed on the Australia Stock Exchange, has applied for an additional loan of $350 million from the US Department of Energy Advanced Technology Vehicles Manufacturing loan scheme. This funding would support the expansion of AAM capacity at Vidalia to 45,000 tpy.

With this additional capacity, Syrah could finalize a second binding offtake agreement with Tesla for an additional 17,000 tpy of AAM over a four-year period, also at fixed pricing.

Syrah was also in negotiations with several other downstream customers for AAM such as Samsung SDI, EV battery manufacturer SK On, and carmaker Ford.

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