Welcome to Heavy Metals, Proactive's weekly commodities report.
Each week, we pick one commodity and dive in – what’s been happening, where’s it headed, what factors are at play and how are markets responding?
This week we're sketching out graphite.
Let’s put it bluntly: this isn’t just about pencils. It's one of the two mineral forms of carbon, the other being diamonds, of course. It has a wide range of industrial uses including being used in steel-making, brake-pads and dry lubricants.
It’s also one of the keys to the electric vehicle future: lithium ion batteries have a lithium cathode and a graphite anode. In fact, Tesla Inc (NASDAQ:TSLA) would agree that securing supplies of graphite is critical.
Tesla CEO Elon Musk said: “Our cells should be called nickel-graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide… [there’s] a little bit of lithium in there, but it’s like the salt on the salad.”
These days graphite is also used in fuel cells, which power hybrid and electric vehicles and in lithium-ion batteries used in portable consumer devices, like laptops and smartphones.
Graphite has struggled in recent years
Graphite has seen a host of swings over the last number of years. Graphite has not experienced the price spikes other battery metals have gone through.
Prices for large flake graphite have recovered from their lows of US$750 tonne in 2016 to approximately $1,200 tonne as of February 2019, prices are still well below the 2012 peak of US$2,800 tonne.
Prices jumped in second half of 2017 -- as much as 40% thanks to an improving steel industry, production problems in China and continued demand from the lithium ion battery industry.
But since that point, prices have been relatively flat. That said, batteries are now approximately 25% of the market -- and are growing rapidly. While China has substantial resources and production capacity for small flake graphite, which has kept prices low.
It's all about that flake
In short, there are several different types of graphite: amorphous Graphite (most common but not suitable for use in most applications), high crystalline graphite and flake graphite. Today, we're talking about flake graphite: it's used in many traditional applications and emerging technology graphite applications.
Graphite prices really are a function of flake size and purity. In short, the bigger the better: large (+80 mesh) and extra-large flake (+50 mesh) and 95% and more carbon varieties bring premium pricing to the table.
Seven to eight years ago, lithium-ion batteries were a small slice of the pie, when it comes to the market, but has been growing at a rapid clip (estimated at 20% annually).
Lithium-ion batteries now account for approximately 25% of the graphite market and that number is expected to grow thanks to an increase in electric and hybrid electric vehicles as well as grid storage solutions.
Chart of the week
Future is promising
The rapidly changing energy future, from electric vehicles to massive energy storage solutions and nanotechnology, will require more tech-grade graphite.
Not to mention the fact that production of large and XL flake graphite is declining in China, as areas are depleted or closed due to environmental reasons. As industrial demand for larger flake sizes continues to grow and the steel industry continues to recover, this all points to a promising outlook for higher large and extra-large flake prices.
Industry experts are also pointing to the next wave: graphene -- the layers that make up graphite. This derivative of graphite is the world's strongest identified material and is being used to make super-strength, lightweight equipment.
It has high electrical conductivity and low light absorbance, which makes it ideal specific applications, such as medical implants, like artificial hearts, flexible electronic devices and aircraft parts.
Berkwood Resources (CVE:BKR) President and CEO Tom Yingling and Technical Advisor Michel Robert joined Steve Darling from Proactive Investors Vancouver to discuss Berkwood and their graphite project Lac Gueret.
The discussion focused on metallurgy and the importance of it in mining. It is especially important in Berkwood’s project and Robert tells us why.
The Government of Sri Lanka has granted the firm exploration rights on land covering 120 sq km, which cover areas of historic graphite production.
The Canadian mining company has discovered high grade graphite at its La Loutre property in Quebec and is working towards a pre-economic assessment. It also has a 80% stake in the Lac Des Iles Graphite property and owns the Quatre Milles Graphite property and mineral rich Vines Lake property.
Contact Katie Lewis: [email protected]
Follow her on Twitter: @kelewis