Synthetic graphite plays an important role in some highly specialized industries. Let's take a look at what it is and why investors should understand it.
Synthetic graphite is a unique material that is often used in metal manufacturing and energy equipment such as batteries and solar panels.
Synthetic graphite is composed of high-purity carbon and is known for its high temperature resistance and corrosion resistance. These characteristics make it an excellent choice for highly specialized industries that require predictable results from carbon materials.
Understanding the difference between synthetic graphite and natural graphite is important to investors because the industry usually requires a specific type of graphite for its applications. The following is the synthetic graphite market and the products it provides.
Synthetic graphite is attractive to investors because it exists in lucrative industries where demand is growing. However, before diving into space, it is important to understand the nuances of synthetic graphite and some misunderstandings surrounding it.
First, the graphite market covers a range of different types of graphite, both synthetic and natural, for their own applications and without competition. Synthetic graphite has nothing to do with natural graphite, but they are both called graphite in the broader market.
In terms of carbon content, synthetic graphite is purer and its behavior is more predictable, which is why it has found a place in solar storage and electric arc furnaces. The production cost of synthetic graphite is much higher than that of natural graphite because the process is quite energy intensive. In fact, the cost may be twice or three times the standard price of natural graphite.
The high price and specific use cases of synthetic graphite mean that it does not often compete with natural graphite in most markets.
Synthetic graphite usually has two forms: electrodes and graphite blocks. The shape of graphite directly determines which industries it will be used in.
Electrodes are mainly made using petroleum coke as a precursor, and are almost exclusively used in electric arc furnaces-these furnaces are used to melt steel and iron and produce ferroalloys.
Graphite blocks-or isotropic graphite-are mainly used for energy storage in the solar industry. These blocks are made using the same petroleum coke process as the electrodes, but the structure of the coke used is slightly different.
The production of synthetic graphite also produces a by-product called secondary synthetic graphite-usually produced in powder form. It is considered a low-cost graphite material, and some of its forms can compete with natural graphite in applications such as brake linings and lubricants.
Primary synthetic graphite is not a by-product like its secondary counterpart. It is usually manufactured in powder form and used in high-end lithium-ion batteries. However, its production cost is higher, and the cost is the same as the cost of manufacturing electrodes.
The outlook for the entire graphite market is optimistic and is related to the battery industry and energy storage applications. In terms of graphite demand, Benchmark Mineral Intelligence predicts that the battery industry will experience double-digit growth from 2022.
Andrew Miller, product director of Benchmark Mineral Intelligence, said the company attributed the growth to "stimulus packages that drive the long-term development of the battery market and the continued commitment of original equipment manufacturers."
It is estimated that by 2030, the demand for graphite in the lithium-ion battery industry will rise from the current level of nearly 200,000 tons per year in the current 700,000 to 800,000 tons market to nearly 3 million tons per year in the 4 million tons market.
Roskill sees growth opportunities for synthetic graphite and natural graphite in the lithium-ion battery market. It is estimated that the total demand for graphite in the next ten years will increase at an annual rate of about 5% to 6%.
In general, the future of graphite seems to be bright. However, synthetic graphite will still face an uphill battle. By 2030, natural graphite will become the fastest-growing subset of graphite—improvements in purity are helping natural graphite enter the nuclear technology and high-end battery markets, which are usually owned by synthetic materials. Price will certainly continue to be the decisive factor in the competition between natural graphite and synthetic graphite.
Will you invest in synthetic graphite? Why or why not? Tell us below.
This is an updated version of an article first published by Investment News in 2017.
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Securities Disclosure: I, Melissa Pistilli, have no direct investment interest in any of the companies mentioned in this article.
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Thank you Stephen and INN. A wonderful review of the current graphite space. I have no doubt that if we can use pitch to make synthetic graphite, we can turn natural flake graphite into a competitor to synthetic graphite. Several laboratories are already doing this work. You only need to process the ores for which you have to find the right way.
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