Li ion batteries are smaller, lighter and more powerful than traditional batteries. They also have no memory effect and a very low rate of discharge when not in use. As a result, most portable consumer devices such as laptops, cell phones, MP3 players and digital cameras use Li ion batteries and they have now moved into power tools as well. While this market is growing rapidly, the batteries are small and the resultant demand for metal is relatively small. Graphite demand in Lithium ion batteries was estimated at 44,000 tonnes in 2008 or about 10 per cent of the flake market.
However, Li ion batteries are now being used in hybrid electric vehicles (“HEV”), plug in electric vehicles (“PEV”) and all electric vehicles (“EV”) where the batteries are large and the potential demand for graphite very significant. While this has created a great deal of excitement in the lithium industry, the investment community is only now beginning to focus on other materials used in Li ion batteries and by weight, graphite is the second largest component. In fact, there is 20 times more graphite than lithium, in a lithium ion battery. Graphite is in a much stronger position than lithium carbonate as it is the anode material of choice for most battery designs. The anode requires a porous carbon material and graphite is the optimum suitor.
There is over 10 kgs of graphite in the average HEV and more than 70 kgs in an EV. Obama’s target is to have one million EVs on the road in the US alone by 2015 which represents a potential 30 per cent increase in flake graphite demand. In a recent research report Canaccord estimated that incremental Li carbonate demand from Li ion batteries will reach 286,000 tonnes by 2020. That will require a six fold increase in annual flake graphite production to provide material for that many batteries.
Only flake graphite which can be upgraded to 99.9% purity can be used to make the “spherical” or “potato” shaped graphite used in Li ion batteries. The process is expensive and wastes 70% of the feedstock flake graphite. As a result, spherical graphite currently sells for between $3-4,000/tonne or three times the price of high quality flake graphite.
Almost all Li ion battery manufacturing currently takes place in Asia. However, it has become a very big priority for the Obama administration due to the decline in the US domestic car industry. The recent congressional stimulus bill includes tens of billions of dollars in loans, grants, and tax incentives for battery and HEV research and manufacture to jump-start US industry. Michigan has awarded $544M in tax credits to four Li ion battery companies with plans to invest more than $1.7 billion in manufacturing facilities.
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