Everyone knows elements like lithium and cobalt are critical for the development of electric vehicles (EVs).
And if you’ve looked into investing in the EV market, you’ll have also certainly learned that other metals like copper, nickel, and tin are just as important.
But there’s another material you should know about that’s also essential to EVs…
I’m talking about graphite.
Graphite is a naturally occurring form of carbon that has a wide range of uses across many industries. The most well-known use of graphite is in pencils, where it is used as the lead material.
Graphite is also used as a lubricant, particularly in high-temperature applications where other lubricants would break down. In the steel industry, graphite is used as a refractory material, able to withstand extremely high temperatures.
But graphite is also used as a conductor of electricity, particularly in batteries and fuel cells. In fact, EV batteries used today contain about 28% graphite by weight.
To compare, lithium represents only about 13% of an EV battery. Cobalt is responsible for only 1%. The rest is mostly nickel and other metals.
Additionally, graphite is a key component in the production of brake linings, gaskets, and heat shields for the automotive industry — it’s not just used for batteries.
Graphite is primarily mined in China, but there are also significant deposits in other parts of the world, including Canada, Brazil, and Madagascar.
The market for graphite is divided into two main segments: natural graphite and synthetic graphite.
Natural graphite is mined from the earth and typically has a lower purity than synthetic graphite, which is made from petroleum coke or coal tar pitch.
Synthetic graphite is used in high-tech applications, such as aerospace and defense, while natural graphite is used in more traditional applications, such as pencils and lubricants.
With the increasing demand for electric vehicles and renewable energy storage, graphite's importance is likely to continue to grow in the coming years. This makes investing in graphite an attractive option for investors looking to capitalize on the growing demand for EV technologies.
But investing in graphite isn’t exactly simple. In fact, it’s not even a material that’s easy to put a price on.
Northern Graphite Corporation explains:
There are no standard, quoted prices for natural graphite, and there is no spot or futures market. Actual transactions in the marketplace are largely based on direct negotiations between the buyer and seller. Companies such as Benchmark Mineral Intelligence and Fastmarkets IM are paid subscription services that periodically survey buyers and sellers and publish pricing information. Their prices are mainly provided by large, high-volume buyers and tend to be conservative. Most small buyers pay higher than published prices.
So investing in physical graphite isn’t really an option. In addition, aside from one or two ETFs that hold a handful of graphite miners, like Global X Disruptive Metals ETF, there’s no proper graphite ETF.
So the most direct way to get investment exposure to graphite is through mining companies themselves.
One of the main advantages of investing in graphite mining companies is that they offer exposure to the entire graphite supply chain, from mining to processing to end-use applications. This means investors can benefit from any increase in demand for graphite, regardless of the specific end-use application.
When evaluating graphite mining companies, it is important to consider a number of factors, including the location of the mine, the quality of the graphite, and the company's financial position. For example, a company with a high-quality graphite deposit in a politically stable country is more likely to succeed than a company with a lower-quality deposit in a politically unstable region.
Overall, investing in graphite can be a smart move for investors looking to capitalize on the growing demand for EV technologies. As electric vehicles become more popular and renewable energy storage becomes more prevalent, the demand for graphite is likely to continue to increase.
