V. MANRAL, Chevron Lummus Global, Houston, Texas; M. Antoniou, Chevron Lummus Global, Montville, New Jersey; K. MAGDOZA, Chevron Lummus Global, Houston, Texas; and V. SURI, Evalueserve, Houston, Texas
Electrification is a megatrend in the industrial and automotive worlds due to energy transition strategies. Newer materials for cathodes are being invented to improve the energy density, safety and charge retention of these materials. However, relatively little has been published and discussed about the anode material—graphite.
Graphite has excellent cycle stability, high electrical and thermal conductivity, good energy density and the right economics to be an optimal anode material for automotive and industrial applications. The demand for graphite is expected to rise exponentially, driven primarily by the high growth projection for electrical vehicles (EVs) and the shift toward scrap-based steel manufacturing in electric arc furnaces (EAFs).
Given the attractive demand projection, investors must understand the benefits and return on investment (ROI) for natural and synthetic graphite routes. This article establishes the pros and cons for each, and specifically highlights the emerging opportunity for upgrading and repurposing smaller petcoke units to needle coke units, therefore contributing to fulfilling the rising demand for synthetic graphite. The authors estimate that the rising demand for synthetic graphite will create a green coke supply demand gap of more than 500,000 tpy by 2030 in the U.S. and Europe, leading to an increase in coker repurpose activity within these regions.
Tailwinds for increased graphite demand. The electrification of automotive fleets is a global megatrend that is picking up momentum across the U.S. and Europe. Graphite is the most prevalent anode material in nearly all commercial applications of EV batteries. From 2023–2030, the consensus projection is for EV sales volumes to grow at a compound annual growth rate (CAGR) of about 19% in the U.S. and in Europe, as well as 13% in China and 19% in the rest of the world (RoW). With 30 battery manufacturing plants installed or in different stages of planning in the U.S., along with 20–50 such plants planned in Europe, the total EV battery capacity is expected to increase to 1,000–1,200 GWh in the U.S. and 900–1,800 GWh in Europe.
Another megatrend that creates tailwinds for the graphite market is the movement toward circular manufacturing for ferrous and non-ferrous metals. Specifically, steelmaking in many economies is moving from blast oxygen furnace (BOF) iron-ore-based manufacturing to EAF direct reduced iron or scrap-steel processing, which emits 70% less carbon emissions compared to BOF manufacturing on a lifecycle assessment (LCA) basis.1 All EAFs utilize graphite electrodes. While steel output is expected to grow marginally over the next decade, EAF steel production is expected to increase from 28% of world production in 2023 to 37% by 2030—i.e., from 529 MMtpy to 721 MMtpy by 2030 (FIG. 2). Several regions plan to replace BOF capacity with EAF capacity in the coming years.
To meet the demand growth for EV and EAF metal forming, graphite material supply will need to expand accordingly. Graphite supply comes from two sources: (1) natural graphite from graphite mines, and (2) synthetic graphite through calcination and graphitization of green coke produced from delayed coking units in a refinery. The current supply gap is being noted in industry, and attempts are being made to bridge the gap through both natural and synthetic routes.
Graphite as an electrode material. Due to its unique combination of properties, graphite has been used as an electrode material for decades in rechargeable batteries. Its high rechargeability, cycling stability, low delithiation potential, high gravimetric capacity and relatively lower costs combine to make it one of the most practical anode materials. Research is ongoing to further improve its rate capability, energy density, lifecycle and safety performance. Despite its recognized shortcomings, graphite has been, and continues to be, the material of choice for battery anodes for decades. Graphite has been the most used material in anodes globally since Samsung first used it in batteries in the 1970s.
While both graphite forms need processing to make their specifications useful for battery or anode applications, synthetic graphite needs more processing and consumes more energy in its manufacturing. Its properties are more desirable than natural graphite from an electrode and battery manufacturing perspective, due to the controlled nature of the feedstock processing, calcination and graphitization used to manufacture it. However, synthetic graphite is also costlier to produce than natural graphite and could have higher carbon emissions. Therefore, battery manufacturers typically blend the two to balance cost, quality and sustainability. Consequently, the growth in the electrification market is an opportunity for both natural and synthetic graphite industries.
MARKET SEGMENTS AND SUPPLY-DEMAND
Natural graphite supply. China dominates the natural graphite supply capacity (FIG. 3), with the main producing areas for small-flake graphite in the Heilongjiang province. While some mines operate at full capacity, others operate at utilizations as low as 30%. This low utilization implies that China may have sufficient capacity to satisfy a large portion of global natural graphite demand until 2030.
Synthetic graphite supply. Needle coke is the key precursor to synthetic graphite. An understanding of the needle coke supply side is essential to gain a better understanding of the synthetic graphite industry. China has substantially increased its production capacity for needle coke over the past decade from petroleum and coal tar routes (FIG. 4). The relatively small domestic consumption has led to both export orientation and low utilization of current plants. The overcapacity in needle coke further underlines China’s dominance in the battery material supply chain and its critical hold on the market.
Synthetic graphite and needle coke demand outlook. It is estimated that the 2023 global market for green coke was approximately 2.8 MMtpy, which is expected to grow to 4.215 MMtpy by 2030, primarily driven by demand for EV batteries and EAF steel electrodes.
Interestingly, an appreciable share of this growth in the needle coke market is from the U.S. and Europe. While there are widely varying projections for EV penetration in the coming years, the future demand will depend on longer-term trends in consumer perception, regulatory incentives, macroeconomic headwinds and geopolitical considerations. A conservative estimate can be computed through an outlook for EV adoption rates in automotive and EAF adoption rates in steelmaking. The authors estimate that green coke demand for U.S. and European EVs and EAFs will grow from 2023 to 2030 at an annual rate of 12% to about 1.05 MMtpy in 2030 (FIG. 5).
Regulations and geopolitics induce localization. Regulations—such as the Inflation Reduction Act (IRA) in the U.S., the Carbon Border Adjustment Mechanism (CBAM) in Europe and the European Commission’s (EC’s) proposal to include environmental footprint labels for products—have all been incentivizing greener production and the localization of manufacturing value chains.
The U.S. imports about 50% of its synthetic graphite needs from China, 25% of its natural graphite needs from China, and a bulk of battery components and graphite electrodes from many countries (including China) with which it does not have free trade agreements (FTAs). Recognizing graphite’s critical importance and supply chain risks, several U.S. government agencies have made natural and synthetic graphite part of their critical minerals list. The U.S. IRA now mandates the provision of EV subsidies to only those vehicle models where the critical minerals and battery components have been partly sourced from the U.S. or from countries with which it has an FTA. Half of the $7,500 federal tax credit is linked to sourcing of critical minerals and the rest to sourcing of battery components.
The critical minerals requirement mandates a minimum of 40% of critical minerals by value to be sourced from the U.S. or FTA partners in 2023, increasing to 80% by 2027. The battery components requirement mandates a minimum of 50% of the battery components by value to be sourced from the U.S. or FTA partners in 2023, increasing to 100% by 2029. Simultaneously, it mandates zero critical minerals to have been extracted, processed or recycled by any foreign entity of concern (FEOC) by 2025, and zero battery components to be sourced from any FEOC by 2024 to qualify for tax credits. FEOC countries include China, Russia, North Korea and Iran. Moreover, IRA’s Section 45X provisions a payout for local production of battery modules, battery cells and electrode active materials. The U.S. government quadrupled tariffs on imported Chinese EVs to over 100% in May, further incentivizing the creation of friend-shoring, near-shoring and onshore manufacturing.
In Europe, several European countries offer incentives, tax subsidies and road tax exemptions to provide economic impetus to EV sales. The EU increased tariffs on Chinese EVs by 17%–38% in June. Furthermore, CBAM duties on steel are expected to indirectly increase the production of EAF and green steel. In addition, the EC has kept natural graphite on its critical minerals list and has proposed a critical raw materials act to ensure EU access to a secure and sustainable supply of raw materials. The European Carbon and Graphite Association (ECGA) has proposed a similar measure for synthetic graphite.2 In response to these measures, China has hardened its posturing and increased its restrictions on graphite export from late 2023.
Some recent changes constitute a short-term downside risk to the graphite outlook. These include the task of phasing out subsidies in China and some European countries, consumer apprehension around charging infrastructure, fewer options for more affordable EVs, and a relatively challenging macroeconomic environment—which have all combined to subdue the latest EV growth projections. However, most analysts agree that the longer-term picture will stay consistent with the megatrend around electrification.
All these measures imply that domestic supply chains and graphite capacities could receive a big boost. The U.S. and Europe could potentially plan for most or all their natural and synthetic graphite requirements to be met through domestic or friend-shoring routes.
Attractive opportunities for both synthetic and natural graphite. Today, battery producers blend natural and synthetic graphite materials to achieve a balance of economics and desirable properties. Therefore, the opportunities for both are attractive in the medium to long term. Depending on the eventual prices for synthetic and natural graphite, consumer EV adoption and the China Plus One strategy that companies adopt, total U.S. and European demand for natural and synthetic graphite for EV and EAF steel applications could increase to 1.508 MMtpy by 2030. This means that demand for graphite raw materials catering to EV and EAF steel applications in Europe and the U.S. could reach 2.402 MMtpy within the same timeframe (FIG. 6).
In addition to the current applications, another fast growing market emerging from the current renewable energy regulations is utility-scale battery energy storage systems (BESS). China has a sizable lead in supplying global battery materials. Geopolitics and regulations will determine how much of this market is supplied locally, but it has the potential to add 30,000 tpy–50,000 tpy to local supply-demand gaps by 2030. Moreover, graphite from needle coke is being actively researched for applications in hydrogen fuel cells; graphene in electronics; and carbon fiber in aerospace, automotive and sports applications. These applications could further increase the long-term demand for the material.
This strongly positive outlook must be counterbalanced with (1) mid-term deacceleration in EV demand due to a potential lack of macroeconomic or regulatory impetus, and (2) long-term innovations in EV batteries that may shift the technology toward solid-state or predominantly silicon batteries. Overall, this demand growth is expected to lead to new mining and needle coking projects in the near future, as well.
With the advent of the China Plus One strategy and other supply chain diversification strategies, battery companies are looking for new sources of natural graphite. As a result, new mining projects are being planned in several places in Africa, Australia and Canada.
COKER UNIT REPURPOSES FOR SYNTHETIC GRAPHITE IN EUROPE AND THE U.S.
The authors’ company has a proprietary delayed coking technology that can repurpose coking units that produce petcoke to units that produce needle coke. While such cokers typically process refinery long residue (LR) or vacuum residue (VR) to produce fuel or refractory-grade coke, they can be upgraded to process aromatic feeds such as slurry oils and coal tar pitch to produce needle coke precursor (green coke) for synthetic graphite applications. Therefore, the increase in synthetic graphite demand can be catered to by the brownfield conversion of such petcoke cokers to needle-coke cokers.
Given the underlying attractive economics, this repurposing has the potential to transform a refiner’s ROI. While the authors project green coke (EV, EAF and other applications) demand growth in Europe and the U.S. to reach 1.15 MMtpy by 2030, the U.S. and Europe’s combined green coke capacity in 2023 was approximately 630,000 tpy. This implies that the supply-demand gap of up to 520,000 tpy may need to be fulfilled over the next 6 yr through brownfield conversions of current domestic cokers.
Important considerations when repurposing petcokers to needle cokers. The following are some key considerations that all such coker unit revamps must focus on:
Takeaways. Attractive supply and demand dynamics for natural and synthetic graphite have emerged from the electrification megatrend driving the industrial and automotive industries to accelerate their energy transition strategies. The authors’ companies recognize the attractive opportunity to upgrade and repurpose smaller petcoke plants into needle coke plants.
The authors’ company has deep experience performing feedstock testing and feasibility studies to revamp petcoke units into needle coke units. In addition, the company has recent commercial experience in the licensing and designing of a grassroots needle coke unit that has been integrated with a calcining unit and has been operational since 2021. The company’s state-of-the-art needle coking technology is supported by pilot plants located in its research and development facility in Pasadena, Texas, which also has the capability for feedstock pretreatment and laboratory analysis.
The co-author’s company works with global oil companies to solve their techno-economics, techno-commercial, decarbonization, carbon accounting, carbon credits, regulatory analysis and green financing questions, helping companies improve their investment ROI. HP
LITERATURE CITED
Virendra Manral is a Delayed Coking Technology Manager for CLG. He has more than 30 yr of experience in process design and technology development. He earned a chemical engineering degree from Panjab University, India, and is a registered Professional Engineer in Texas.
Michael Antoniou is a Senior Business Development Manager for Chevron Lummus Global (CLG). He develops and implements marketing and commercial growth strategies for CLG process technology licenses, catalysts, proprietary/capital equipment, and research and engineering services in the refining and energy transition space in North America. He has 25 yr of experience and is a chemical engineer from the University of Pennsylvania.
Keith Magdoza is a Delayed Coking Process Engineer with CLG. He earned a degree in chemical engineering from the University of Texas at Austin.
Vishal Suri is Vice President of Insights and Advisory for Evalueserve. He has more than 25 yr of experience advising manufacturing companies on technology strategy, techno-commercial analysis, market analysis and sustainability topics. Mr. Suri earned a Bch degree in chemical engineering from the Indian Institute of Technology Delhi (IIT Delhi) and an MBA degree from the Indian School of Business in Hyderabad.