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The EV industry has been a prominent topic of discussion across markets, with increased tariffs introduced, new American partnerships made and new concerns raised in terms of the feasibility and future of the Western EV industry.
But despite these concerns and the hardships that companies have faced as of late, Jacquemin does not believe the industry is slowing.
“Every time you pick up the news you hear about some battery manufacturer that is rethinking their plan, passing the development of a new site and reducing investment; but fundamentally it’s still there, the market is growing 30% year over year,” he told Fastmarkets.
Northern Graphite is currently the only producer of flake graphite in North America, supplying close to 20% of the North American industrial graphite market, according to the company.
“From our perspective, there’s going to be a big shortage of graphite whether the market is twice the size it is today, three times, four times, five times – there’s going to be a big shortage, so we need to keep pushing,” Jacquemin said.
Going forward, he believes there will be two markets for graphite, which he wrote about in an article in September 2023.
“The heavily-state-subsidized Chinese market, where graphite is produced with minimal environmental and sustainability restrictions as China feeds its ambition to dominate the global EV industry, and the North American markets, where automakers will have to use locally sourced graphite, be it natural or synthetic, for the lithium-ion batteries that power their cars,” he wrote.
“If you consider that only 30% of the flake graphite is produced outside of China, you have to plan for constraint in the marketplace in the next one to three years,” Northern Graphite’s chief salesman Marco Zvanik said on the company’s YouTube channel in March. “So, regardless of what someone’s battery strategy is, where the plant is, what technology they’re using, if you don’t have the flake, you’re not going to be able to convert it into anode material.”
“So, companies are already thinking: how do we hedge that by buying today at today’s pricing and inventorying the material for two or three years until they actually have to convert it into battery anode material?” Zvanik continued.
Fastmarkets’ weekly price assessment for graphite flake 94% C, -100 mesh, fob China was $450-480 per tonne on Thursday July 18, unchanged since June 20.
And Fastmarkets’ weekly price assessment for graphite flake 94% C, -100 mesh, cif Europe was $650-750 per tonne on Thursday, unchanged since June 13.
In an effort to support the growth of the North American EV industry, the tariff rate on EVs under Section 301 is set to increase from 25% to 100% in 2024, according to a release issued from the White House on May 14.
With extensive subsidies and non-market practices leading to substantial risks of overcapacity, China’s exports of EVs grew by 70% from 2022 to 2023 – jeopardizing productive investments elsewhere. A 100% tariff rate on EVs will protect American manufacturers from China’s unfair trade practices, the release stated.
The release announced that the tariff rate on lithium-ion EV batteries will increase from 7.5% to 25% in 2024, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026. The tariff rate on battery parts will increase from 7.5% to 25% in 2024.
The tariff rate on natural graphite and permanent magnets will increase from zero to 25% in 2026.
“With regard to graphite, because China has such a dominant position – they produce 95% of the world’s graphite for batteries today – it’s dangerous not to create our own supply chain. So the government has to step in and help this nascent industry… to develop itself. If you don’t protect it, nobody will invest in the space,” Jacquemin told Fastmarkets.
“So hopefully the tariffs will work, the price of the commodity will go up, the people will invest in the space; and if they do, we’ll get the money that we need to be able to build the supply chain. And then once the supply chain is established, we can compete on equal grounds,” he continued.
Already in graphite, some market participants have noted that amid geopolitical tension, investment in the ex-Chinese graphite supply chain has increased, due to factors including tariffs on anode products from China into the US.
But in the immediate term, due to a general lack of spherical graphite production outside of China, consumers continue to rely on Chinese suppliers, according to market participants.
“Ex-China spherical graphite doesn’t really exist; if it did, the demand would have increased, perhaps,” a graphite producer outside of China said on Friday July 19.
Spherical graphite is a major raw material for natural graphite anode production.
All eyes are on the upcoming US presidential election, but impacts on the industry may be low.
“I think everybody is watching the elections and what may happen after the elections, and we’re continuing to push to down this path. The elections will not affect this. Trump was the one who installed the tariffs in the first place; Biden was the one that waived them. In my mind, Trump is going to be tougher on China [if he wins] than Biden was,” Jacquemin said.
“Most of the battery belt is in red states, and I don’t think he’s going to reverse too much,” a graphite buyer told Fastmarkets about a possible second term for Trump.
On the other hand, “we would expect a more ‘anti-green’ set of policies from Mr. Trump should he take office as he has long been skeptical about the headlong rush into ‘electrification,’” Marex analyst Ed Meir wrote in his newsletter on Thursday.
“Although [Trump] may not be able to undo some of the existing legislation that is in place, he could take steps through executive action or departmental reviews to slow-walk subsidies going to EV’s or perhaps remove some existing tax credits slated for the sector. Spending on infrastructure, charging stations and power grids could also be delayed, especially if budget cuts are needed. New legislation could also pose a threat to the growth of US EV sales,” Meir continued.
According to Jacquemin, the answer is creating a solid place for North America and Europe in the EV industry.
“China has been the big winner because they were there before anybody else. They have the lowest cost, and they move much faster than anybody else, so today they lead the charge. But that doesn’t mean that Europe and North America can’t get their act together and catch up, and that’s what the government is trying to do both in the US and Europe to protect this nascent industry,” he said.
Still, there is skepticism from all sides on this topic. Fastmarkets has continued to hear about industry struggles in terms of supply and demand. The topic of EV consumer interest versus ownership, the issue of return customers and concerns about grid capacity were all discussed by market participants at the Society for Mining, Metallurgy & Exploration’s (SME) mining finance conference in May, as well as at Fastmarkets’ annual Copper Seminar.
Jacquemin believes that attention must be paid to the changes in the average US EV customer.
“The fundamentals of the consumers are completely changing, and therefore people now don’t want to buy a big luxury car, they want to buy a car that will get them from A to B that will get them in the safest, cheapest, quickest possible way, and that’s what the Chinese have given. So, we have to do the same; we have to create those same cars.”
And Fastmarkets’ analysts also point to affordability as a key component to bringing the EV transition to fruition.
“To maintain momentum in the EV transition, EV prices must come down,” Fastmarkets’ battery manufacturing cost modeler Muthu Krishna said in April, adding: “To do this, expensive, oversized battery electric vehicles [BEVs] with oversized battery packs must give way to affordable BEVs with smaller battery packs whilst the charging infrastructure is drastically improved.”
Fastmarkets price reporter Solomon Cefai in London contributed to this article.
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