➤ Greater collaboration between graphite producers, processors and end users is needed to meet the challenge of scaling up the graphite supply chain for electric vehicle battery anodes.

➤ Curbing dependence on China for graphite supply will be a multiyear process, even under optimistic conditions.

➤ Policy is beginning to catch up to bullish market sentiment, but there is more to be done in the realm of permitting reform.

Graphite, which has often avoided scrutiny in battery supply chain discussions, is gaining attention for its important role in electric vehicles, particularly as demand for EVs is set to explode in the coming years.

Graphite processor Graphex Technology LLC, the U.S. subsidiary of Hong Kong-based Graphex Group Ltd., recently outlined plans to join forces with Canadian graphite producer Northern Graphite Corp. to identify a site for a large-scale graphite processing facility in Canada. The announcement came shortly after U.S. imports of natural graphite soared 100.5% year over year to a three-year high of 25,671 tonnes in the third quarter of 2022.

S&P Global Commodity Insights spoke with John DeMaio, president of Graphex Group's graphene division and CEO of Graphex Technology, about investments in midstream processing and collaboration across the battery supply chain. The following conversation has been edited for clarity and length.

S&P Global Commodity Insights: Graphex Technologies announced Jan. 12 that it will work with Northern Graphite to identify a site for a large-scale, mid-stream graphite processing facility in the Baie-Comeau region of Quebec. What does this mean for Graphex, and why have you chosen to collaborate with Northern Graphite?

John DeMaio: I think that the collaboration between us and Northern has the potential to be game changing.

We can say that we are the only experienced midstream processor that is close to actively building facilities in North America. [Syrah Resources Ltd.] is building a facility, but they've not done the midstream processing before. Same with [Nouveau Monde Inc.]

What we think this represents is the quickest path to experienced players producing the material that's been heretofore kind of proliferating in China. So we really feel like there's a lot to be positive about from an industry perspective.

There are lot of [mining and processing] announcements, but the activity tends to lag pretty far behind, so we definitely want to be known for walking the talk. We don't want to just make announcements; we want to make announcements that we know we're going to follow through on. And we've been doing that, and this is a big one.

You've talked in the past with Commodity Insights about how new graphite supply needs to be brought online quickly to meet expected electric vehicle demand requirements. Can you describe some of the biggest obstacles to the industry scaling up its production of graphite for battery anodes?

[It] starts with the raw material supply and it filters through what we do, which is the midstream.

Without getting too down into the weeds, the demand for vehicles translates to a tremendous demand for graphite, and the supply is just not there. It's not there today, and there's concern about how it will ramp up to meet the demand in the future.

If we focus just on North America, the industry is looking not only for raw material supply, but now finished product supply. When you look at the landscape, there's very few pathways to get there, especially if you're trying to avoid using graphite from countries of concern, particularly China right now.

As far as scalability, the industry has, let's just say 500,000 tonnes of demand coming online for graphite, based on the factories that have been announced. It doesn't do the industry much good to have small contributors. It helps a little to have a 15,000-tonne plant, for example, like the one we're moving ahead with in Michigan. It's a good step, but what you need is access to hundreds of thousands of tonnes [of graphite], and then you need the capability to process that into the battery material.

Many countries, including the U.S., are seeking to cut their dependence on China for critical minerals over concerns related to issues like national security. As companies such as Graphex Technologies build out North American operations, what kind of timeline do you expect for countries to slash their dependence on China for graphite?

I think realistically, probably five years is what it's going to take to get to an appreciable level of competition because China is going to keep expanding their capabilities.

You figure it takes about two years at least to get a full end-to-end plant operational, and that's probably being even a little bit optimistic. That's where I think policy can help with a kind of regulatory expediting.

It would take us two years to build out maybe 20,000 or 30,000 tonnes. And that's probably being a little bit optimistic. That's 30,000 tonnes versus a [demand] that's going to be approaching 500,000. You know, so we need to do that at multiple locations at the same time. We can do that, but nobody is going to do it without orders or commitments from the original equipment manufacturers. The speed at which we can build out is going to be dependent on how well and how fast we all collaborate.

Given the challenges to scaling up production to meet demand expectations, what needs to happen in today's graphite markets to incentivize the kind and scale of investment needed, particularly in midstream processing?

I would say, without sounding too philosophical, that collaboration really needs to happen as an industry. That means the consumers, the automakers and battery makers, the mining operations, and the processors like us in the midstream.

The battery chemistry is a kind of fine science. We call it graphite when it's in the ground, and we call it graphite when it goes into the battery, but it's transformed from one stage to the other into something different. That qualification process gives end users some pause [before they] want to get into contractual relationships with either processors like us or mining operations — because there's not 100% assurance that the material will qualify, so to speak. So without those kind of assurances, those kind of contracts, it's hard for the industry to move forward with capital projects.

That's particularly true of mining operations. Graphite is not the most lucrative mining operation. If you're going to build hundreds of millions of dollars' worth of capital infrastructure, you might as well for gold, diamonds or something lucrative. The value of graphite really gets added in the midstream where we play.

The collaboration needs to be a little bit more aggressive, if you will. Let's tackle this problem as an industry versus everybody in their silos. What we are trying to do here is to electrify mobility. So let's figure it out.

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