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Beijing has a grip on global battery manufacturing. Here are India’s alternatives

China’s curb on graphite export has made the world look at alternative raw materials and sourcing destinations to keep the electric vehicle battery dreams alive. But it would take years to perfect the “tried-and-tested chemistries” that do not rely on materials such as graphite and lithium.

Replacing Beijing in the electric vehicle (EV) value chain would be a big challenge, industry stakeholders say. The world has already invested heavily into traditional batteries that have found hundreds of use-cases in mobility, industry and personal electronics. As a result, the world “can’t currently afford” to take chances, they say.

“The development and commercialisation of new technology with such large implications from a utility, economics, safety supply chain and regulation perspective would take many years,” says Nishchay Chadha, co-founder & CEO, ACE Green Recycling.

Experts point out that graphite and lithium form the foundation of all lithium-ion cells, and such batteries are used widely nowadays. The chemistries are current favourites because of relatively lower cost, higher energy density and better conductivity. Any disruption in the value chain of these batteries will affect various industries.

Even if technologies are being developed to reduce the dependence on these minerals to power a battery, the lithium-ion system would be dominant for at least a decade, say industry observers.

Lithium-ion’s hold is deep

This is because lithium-ion is a globally proven technology and makes up a significant volume of batteries being produced today. The US, the EU and others are making significant capital expenditure to manufacture cells based on these technologies. Besides, industries prefer to use proven technologies for various reasons. These factors slow the deployment of new technologies. “Automobile companies — a prominent user of batteries — are very conservative when it comes to safety and product liability. Hence, auto companies making EVs will use only well-proven technologies,” says Srihari Mulgund, Partner and New Age Mobility Leader, EY-Parthenon.

One of the new battery chemistries that is close to commercialisation in 3-5 years is sodium-ion. But a key challenge with sodium-ion is its energy density, which relegates this to niche applications. “Sodium-ion chemistry doesn’t use any lithium for cathode (positive electrode in a battery) and uses hard carbon for anode (negative electrode),” says Mulgund. Such new chemistries can reduce the demand for graphite, freeing the world from depending on mines in unfriendly nations. But until then, graphite is the tried and tested material that scores high on the price-performance ratio. Pratik Kamdar, co-Founder & CEO, Neuron Energy, says the curbs on graphite and lithium won’t make much impact as companies are looking at better technologies. “But these technologies will take some time to be commercially viable and accepted across various markets and economies. In the short term, the curbs will have some form of impact.” Graphite dependence China is the largest graphite producer and exporter. It refines over 90% of the world’s graphite into the material used in almost all EV battery anodes — the negatively charged portion of a battery. Graphite constitutes nearly 10% of a battery’s production cost and is the largest component by weight in lithium-ion batteries (EV batteries can contain 50 kg-100 kg of graphite). The World Bank estimates that graphite will dominate the demand for minerals needed to produce batteries till 2050. Graphite is the primary material used to make the anode — one of the two electrodes that make a battery. When a battery is charged, lithium ions flow from the cathode to the anode via an electrolyte buffer separating the two electrodes. For all lithium-ion-based cell chemistries, the anode element is either natural graphite or synthetic graphite, with some levels of silicon doping. On October 20, China’s Ministry of Commerce announced curbs on graphite export, mandating export permits as of December 1 for some graphite products used by auto manufacturers. The announcement came three days after the US announced restrictions on the sale of high-end semiconductors to Beijing amid concerns that China could use the chips to advance its military. Apart from this, the EU has imposed tariffs on Chinese-made EVs stating that the companies benefit from unfair industrial subsidies. On August 1, China had imposed curbs on exports of gallium and germanium, too, used to make semiconductors.

“This step is a useful reminder of the urgency in de-risking the battery materials supply chain from China. Any prolonged supply distress will greatly impact global decarbonisation plans,” says Mulgund. What’s brewing on other fronts Some industry stakeholders are optimistic that China’s latest export curb on graphite will push EVs makers to focus on finding a viable replacement. One of the hopes they have is on synthetic graphite, which has attracted a lot of discussion in current times. Synthetic graphite generally performs better in electrolyte compatibility and battery longevity, says experts. “Currently, synthetic graphite dominates (55-60% market share) the anode material market,” says Mulgund. “Despite higher cost, there has been a steady shift towards synthetic graphite, with 80-90% of new capacities announced in favour of this. We estimate that synthetic graphite will continue to gain share because of its enhanced performance in terms of improved stability, energy density and life cycle.” While natural graphite is extracted from the ground, synthetic graphite is a manufactured product derived from carbon precursors — like petroleum coke or coal tar — in a process called graphitisation. Synthetic graphite can be made in a shorter time, as finding a mine for natural graphite and developing it for extraction can take a year or more. Reaching commercialisation can take even longer. Synthetic graphite can be made once a plant for it is commissioned. But it is a costlier option as of now than natural graphite. Data from Market Intelligence shows processing synthetic graphite is three times as energy intensive as processing natural graphite, which translates into higher costs for the artificial material. Chadha says that if the graphitisation system improves, if energy prices fall further, or if graphite from China is no longer available, the world will undoubtedly move towards synthetic graphite production. Some experts are willing to bet that China’s curb will boost the use of silicon to replace graphite as the key ingredient in battery anodes. But further advancements in battery technology and additional policy support are required to further this cause, they say. Silicon-made anodes charge faster than many others, so there is some interest in developing this technology. Significant investment needed The reason the world depends on China as it is the leading producer of graphite — accounting for about 65% of supplies in 2022, according to the US Geological Survey. In terms of reserves, China ranks third after Turkey and Brazil. However, China refines over 90% of the world’s graphite into the materials that are used in virtually all EV batteries. “The only real advantage China has is in its material processing and battery production capacity. The world has relied on cost-effective Chinese processing and manufacturing, allowing it to take up significant market share,” says Chadha.

The CEO of ACE Green Recycling sees some diversification happening now, as rising demand for lithium batteries has led to the emergence of new materials and processing projects in Europe and North America. The world will now have to actively develop other sources of graphite to weaken the grip China has on these supply chains. According to the US Geological Survey, the world has about 330 million tonnes of graphite reserves with 800 million tonnes of recoverable graphite. But exploration and investment into finding newer sources have not been adequate. “This results in making the graphite supply sticky, as tier-1 battery cell manufacturers have to rely on two or three natural graphite anode suppliers. A mine in Madagascar took 11 years to reach product qualification, from discovery of mines. Similarly, Australian company Talga acquired a mine in Sweden in 2012 and the production (along with anode project) is expected to reach commercial stage in 2023-24,” says Mulgund. This shows that the time from discovery of a reserve to commercialisation takes up to a decade. With technology developing and changing almost overnight, there is a risk that by the time a mine is ready to be commercialised, its output might not be in great demand. What India should do The Indian government has identified graphite as a “critical mineral”. China was the largest source for India, which imported natural graphite (worth $14.31 million) between January 2022 and December 2022, the commerce ministry data show. China retained its top spot between January and August 2023, with India importing $8.88 million of natural graphite.

Kamdar says while India can seek alternative sources of graphite or invest in domestic graphite production, establishing a robust domestic supply chain can take time and require significant investments. Industry stakeholders say countries other than China can be a costly option for India, leading to a rise in domestic battery prices. Notably, 70% of materials used to make EVs in India are imported from China and other countries. Mulgund says a handful of companies are working in the graphite space. But he quickly adds that it will take time for the country to be self-reliant in this segment. Experts are confident that if China closes its doors, India will be able to source materials from a whole host of other suppliers. The supplies will become more important as the country expands its lithium battery manufacturing base and sets up gigafactories.

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