Ukraine was set to lean into becoming a major supplier of graphite to a world hungry for the battery ingredient until Russia's invasion brought existing and prospective operations to a halt.

Ukraine's graphite reserves are among the world's top five, according to the government. The country contributed 17,000 tonnes of graphite to global markets in 2021, making it the sixth-largest producer, though that is still a drop in the 1 million-tonne bucket of global production, according to the U.S. Geological Survey.

The war has driven much of that production offline — Volt Resources Ltd.'s Zavalievsky mine in Ukraine has suspended operations, for instance. However, the world's appetite for the mineral is only growing as electric vehicle sales boom, and demand for graphite, the largest component of EV batteries by weight, is set to expand.

Ukraine has six major graphite deposits that would help the country reduce the global sector's reliance on China, according to a November 2021 study published in association with the Taras Shevchenko National University of Kyiv in Ukraine. Ukraine's ready supply of natural graphite, which has lower emissions than synthetic graphite, would likely find a market in both Europe and the U.S. where carmakers are seeking to diversify supply. However, developing the deposits will be a challenge with Russian missiles still flying.

"Ukraine holds pretty significant potential to be a large-scale graphite supplier," Trevor Matthews, Volt's managing director, told S&P Global Commodity Insights.

Ukraine's graphite potential

While Volt's European customers were traditional graphite users, such as refractories that use it as a dry lubricant, scale will be needed to feed what Matthews calculates to be about 1.5 million tonnes per year of flake graphite required for battery anodes in Europe alone by 2030.

China supplied 820,000 tonnes of natural graphite in 2021, U.S. Geological Survey data shows, but European companies are looking to buy graphite closer to home. The war has made that harder.

"The current supply disruption in Russia and Ukraine demonstrates the broader need for long-term supply security," said Shaun Verner, CEO of graphite producer Syrah Resources Ltd. Syrah owns the integrated Balama operations, comprising the world's largest natural graphite mine and processing plant in terms of production capacity. The mine is in Mozambique, while the Vidalia plant is in the U.S.

Europe has other supply options, including Talga Group Ltd., which commissioned Europe's first qualification plant for lithium-ion battery anodes in northern Sweden using graphite from its Vittangi project, which hosts the continent's largest graphite resource.

Mineral Commodities Ltd. also wants to become a vertically integrated supplier of graphite anodes in Europe. The company plans to expand the Skaland mine in Norway, which was the world's highest-grade graphite operation when it was acquired in 2019.

Europe is "looking outside Europe for graphite material, which it has to, but prefers to have European supply," Matthews said, based on discussions with the European Raw Materials Alliance, the EU body that Volt joined in August 2021.

Ukraine may be poised to help meet some of that need.

"Ukraine has one of the largest reserves of natural graphite in the world," University of Kyiv researchers said in November 2021. The six major deposits defined in the country are estimated to host reserves totaling 306 million tonnes of ore, containing 17.9 Mt of graphite.

BGV Group Management has a new 20-year production license for the Zarichna deposit, which it has prepared for operations 3.5 kilometers from the Zavalievsky plant. Zavalievsky hosts Europe's largest graphite deposit, according to BGV Group.

Volt acquired 70% of the Zavalievsky group of companies, or ZG Group, in July 2021. The operation produced 1,369 tonnes of graphite from its mid-November 2021 restart to the winter-enforced shutdown about a month later, which is about 15,000 t/y at an annualized rate, Matthews said.

The mine has the potential to ramp up to 100,000 t/y by 2025, "though if the war is still going on, the ability to borrow money will be very difficult," Matthews said.

The hardships of war

Volt would like to restart production, but shipping and key materials have been hard to lock down.

"Some of the materials that we would have normally procured in Ukraine aren't there anymore, like reagents and grinding media from the east, which is where Ukraine's industrial hubs are mainly based. Fuel is also in short supply," Matthews said.

And even if the operation could resume production and find a buyer, the war makes transporting the product nearly impossible.

"We can sell the product, but how do you get it across the border? No EU trucks will come across the border because they're uninsured as it's a war zone," Matthews said. Volt is assessing how to resolve these challenges to restart the business.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.