What if we were in the midst of an infrastructure boom, and all of America’s steel refineries sat idle?
To make matters worse, what little steel was out there for sale came from just a couple sources, and they were controlled by unfriendly countries willing to use it as leverage.
It sounds absurd in our global economy — where anything, anywhere can be had at a price — but since the dawn of humanity, every technology has had something absolutely essential to make it work, there hasn’t been enough to go around, and a handful of countries or companies horded supply.
That is exactly the kind of situation the 21st century’s new and emerging technologies are facing right now.
From military hardware to power grids down to the cars we drive and the phones in our pockets, a critical resource for 21st century energy is seeing demand soar.
Nowhere near enough of it is available. The U.S.A. produces none of it. Nor do a vast majority of our allies.
We have to buy it all from China. With demand ramping up fast right as the threat of a trade war looms, the timing couldn’t be worse.
The #1 Ingredient
What we’re really talking about here is energy storage on ever smaller, denser scales.
It is the breakthrough that has allowed us to access the entirety of human knowledge through phones in our pockets.
It will allow the power grid to modernize, broadening renewable energy sources and reducing the cost of peak demand.
And it’ll be in every electric and self-driving car going on the road worldwide, as energy distribution (think power stations and oil shipping) and even the roads themselves evolve to the changes.
All of this is due to the ever-growing demand for portable energy storage, especially lithium-ion batteries.
And, though many might not know it, the metal most in demand for them is carbon.
As Elon Musk said recently: “[There’s] a little bit of lithium in there, but it’s like the salt on the salad.”
Only 2% of a lithium-ion battery is actually lithium, while more than 80% of the battery is made from a particularly rare and hard-to-source form of graphite.
And in spite of the demand, there just isn’t enough to go around. Nor will there be for many years to come.
Going back to Elon Musk, the Gigafactory built by Tesla in Nevada will produce more batteries in a year than were produced in the entire world just five years earlier.
Tesla is already building a second factory in Buffalo, New York. Based on current projections, the world will need 40 such factories.
Currently, there are only 85,000 tonnes of high-quality graphite produced in a year — and the Gigafactory is expected to consume 115,000 tonnes a year all by itself.
The Bottleneck
Carbon is about as common as it gets, but it all depends on purity. Diamonds are an extreme example of this, but they aren’t alone. Graphite can be nearly as pure, with a different structure.
Quantities of high-grade graphite worth extracting are rare. These days, most of it comes from China, and a new, non-Chinese mine hasn’t been built since the 1980s.
This leaves companies like Tesla, which need to find huge supplies, along with the 20 or so car companies that are rapidly ramping up electric vehicle production, in a terrible situation.
They are chasing growth in a market that has a supply bottleneck.
Tesla can build beautiful cars and massive battery factories. But the cars won’t run, and the factories will lay off employees and sit idle, if it cannot outbid dozens of other car producers — along with battery makers for phones, computers, the power grid, and the military — to secure the graphite it desperately needs.
Only one of Tesla’s battery-producing competitors will not have this problem. It is building a massive new battery factory, and it has a guaranteed source for all the graphite it will ever need.
What sets it apart? It owns what is poised to become the first new mine outside of China in decades.
As a result, it will supply itself with graphite at a cost far lower than all of its competitors, completely circumventing the bottleneck and skyrocketing costs in the open market.
Gerardo Del Real has been covering this trend and company for his Junior Mining Monthly readers. Check it out now before the battle for graphite becomes an all-out war.
