Graphite, once the stuff of pencil lead, figures prominently in post-paper-age consumer electronics, and escalating spot prices reflect its critical role in electric vehicle manufacturing. In this interview with The Critical Metals Report, Zimtu Capital Director Ryan Fletcher explains the fundamentals underpinning the graphite market. It adds up to ample opportunities for investors.
The Critical Metals Report: Ryan, as someone who knows the graphite business, what would you recommend to investors?
Ryan Fletcher: The space should be on investors' radars. Demand for graphite is increasing quite rapidly. Not only are historic uses growing, but new applications are adding demand. A number of professional investors, analysts and researchers have studied the fundamentals, and they see the potential. But it's not yet front and center on the investment community's radar. It should be.
TCMR: In terms of graphite's historic uses, it's used in tennis rackets, golf clubs and is important to the steel industry. What are some of graphite's properties and historic applications?
RF: Graphite is an excellent conductor of heat and electricity and is corrosion and heat resistant. It's a strong substance. It's light. All of those qualities make it valuable. It's used in the steel industry. The automotive industry is also a major consumer. Because of its heat resistance, it's also used in crucible liners and so forth. Those are big applications.
TCMR: Would you say that demand in these historic markets is increasing?
RF: Absolutely. The historic markets are still growing and you can't forget about them. The demand from these markets is increasing, say, at a rate of 3-5% per year, based largely on global economic growth fueled by Asia, India, Russia and Brazil. But now we are seeing graphite's application in lithium-ion batteries, fuel cells and nuclear technology, and in plastics and composite frames that find their way into products such as Boeing Co.'s (NYSE:BA) new Dreamliner as well as wind mills. These applications will add a big, incremental demand push to the market. This is all new demand.
TCMR: How does graphite figure into energy storage applications?
RF: The most important applications in energy storage are lithium-ion batteries and fuel cells. A lithium-ion battery needs 20 to 30 times more graphite by weight than lithium. Based on that, the number of end user transactions, the amount of capital and the level of interest in the graphite space should be about 20 to 30 times more than in the lithium space, but graphite has been flying under the radar.
TCMR: Maybe that's partly because the lithium-ion battery isn't called the graphite-lithium-ion battery.
RF: True. These batteries have two parts – the cathode and the anode. Lithium is the cathode. The anode is graphite. It's become clear that these batteries will power not only electric vehicles but also our tools, our phones, our laptops, our electronics, our toys. They all use these batteries, and that's going to be a big demand driver.
TCMR: How about in fuel cells?
RF: In the same way, graphite is used in plating and is an important component of a fuel cell. A lot of the same things I said about lithium-ion batteries also apply to vanadium redox batteries. Vanadium's been getting a lot of attention. It takes a lot of graphite to produce these batteries as well.
TCMR: Are the batteries used in vehicles such as the Chevy Volt, Nissan Leaf and Tesla Roadster lithium-ion-graphite batteries?
RF: Yes. There was some debate whether a nickel-metal hydride battery would be the key driver for electric vehicles, and the original Volt was based on that technology. But the Leaf, the new hatchback version of the Volt, and the Tesla are now all based on the lithium-ion-graphite battery.
I've been speaking with a lot of the bright and experienced people who closely follow battery technology, such as the crew at Byron Capital, which has done a lot of good work in this space. Battery technology goes through phases and a certain technology typically can reign for some 10-20 years. It appears that the mass adoption of lithium-ion batteries has just started to take shape and will dominate for a long time. Graphite is so critical for that.