(Reuters) – As Chinese battery makers and EV manufacturers search the world for lithium, nickel, and cobalt, they are worried about the availability of graphite, a mineral that is closer to their home.

Graphite is both a natural and synthetic form of graphite that’s used to make the negative end in a lithium-ion batteries, also known as the anode. China accounts for 70% of graphite production. There are no viable alternative options to lithium-ion batteries. (Graphic: China key EV material prices, https://fingfx.thomsonreuters.com/gfx/ce/jnvweakjevw/ChinaEVMaterials.png)

Chinese graphite producers are challenged to keep up with the growing global demand.

BMI, Consultancy Benchmark Mineral Intelligence sees an approximately 20,000-tonne graphite shortage in 2022. This compares to a comparable surplus of last year. According to an industrial source, about 20,000 tonnes graphite are sufficient for making batteries for around 250,000 EVs.

A person familiar with the subject said that Contemporary Amperex Technology Co Ltd, a leading global maker of EV batteries, is trying to find graphite as a key ingredient to help keep up with increasing orders.

According to the source, “There are not enough graphite available for domestic players” because they were not permitted to address the media.

The source stated that demand from clients such Tesla (NASDAQ:), is rising rapidly, while the supply of raw material has been extremely limited,” and added that power rationing in recent times had worsened the situation.

Reuters asked CATL to comment, but it did not. (Graphic: Synthetic Graphite Demand Forecast, https://fingfx.thomsonreuters.com/gfx/ce/jnvweabdwvw/BMI1.JPG)

“SEVERE SHORTAGE”

A source familiar with the graphite market said that the forthcoming Winter Olympics in Beijing will increase carbon demand.

The source said that graphite was in great shortage, and companies have been buying up large quantities of it. However, he declined to identify himself as he isn’t authorized to discuss the matter with the media.

BMI Analyst George Miller stated that Northeast China’s graphite miners close in winter because of extreme cold. This forces graphite processing companies to rely on inventory to fulfil their orders.

“Graphite users, either within China or elsewhere, are fighting over a very limited stock of material,” he stated.

BMI predicts that the global demand for anodes is expected to grow at an average rate of 27% annually over the next decade. This growth will be driven by lithium-ion.

The prices of anode-grade graphite flake on China’s domestic market have risen almost 40% over the past year at 4,500 Yuan ($707) per ton, surpassing the 2018 record lows according to BMI.

China’s auto industry sold 2.99 million EVs and hybrids during the first eleven months of 2021. This is a significant increase from the 2020 period. (Graphic: Historical graphite pricing, https://fingfx.thomsonreuters.com/gfx/ce/zdpxoxkzyvx/Bmi2.JPG)

Tesla, the most valued EV manufacturer in the world, has registered support for U.S. The U.S. will reinstate Section 301 tariff exemptions to import artificial and natural graphite from China, as several tariff exclusions are expired.

In a recent public comment filed with the U.S. Trade Rep, Tesla stated that it had concluded that there is no American company capable of producing graphite in accordance to Tesla’s specifications. (Graphic: China new energy vehicle sales jump to new highs in November, https://fingfx.thomsonreuters.com/gfx/ce/lbvgnlmjlpq/ChinaEVSalesNov2021.png)

CATL plans to use the natural graphite form in the battery anodes instead of artificial graphite.

Miller claimed that “we have heard indications” that Chinese anode producer are moving their blends to a higher percent of natural feedstock.

($1 = 6.3630 )