Viewpoint: China overshoots on battery anodes

Market: Battery materials, Petroleum coke
03/01/23

Optimistic forecasts for lithium-ion battery market growth have spurred a surge in planned anode production projects, especially in China. But China's rapid development may be overshooting even this strongly growing demand, potentially setting up the market for a slowdown on the back of overcapacity.

Chinese producers have announced plans to boost capacity of synthetic graphite battery anode material to 14mn t/yr in coming years, up nearly ninefold from 1.6mn t/yr today, according to industry projections. They also intend to increase silicon anode capacity to 270,000 t/yr.

But the synthetic graphite capacity alone would be almost five times the forecast global demand for battery anode by 2025, casting doubt on how many projects will actually be developed.

In just the past two months, China's Guizhou province said it aims to build 800,000 t/yr of battery anodes and feedstock materials capacity by 2025. Jiangsu HSC New Energy Materials said it plans to complete a 200,000 t/yr anode material production facility in Jiangyin in east China's Jiangsu province within the next two years. DQ Carbon announced it would build a 160,000 t/yr anode materials plant, and mining firm Inner Mongolia Dazhong announced it will build a 100,000 t/yr synthetic graphite anode material plant in Chifeng in north China's Inner Mongolia region. And major battery materials producer Ningbo Shanshan said it is looking to accelerate construction of a 300,000 t/yr anode materials plant in Kunming in southwest China's Yunnan province.

China's northern and eastern regions today account for about 57pc of China's synthetic graphite production. But if all of the announced projects were completed, the regions' share would drop to 31pc. Much of the expansion is planned for the southwest, a region expected eventually to account for 35pc of China's capacity.

Production capacity of needle petroleum coke, a key feedstock for synthetic graphite, is not expected to grow at anywhere close to the same rate. Needle coke capacity is estimated at 2.7mn t for 2022 and is expected to rise by nearly 15pc to 3.1mn t in 2023 and by another 3pc in 2024. But current needle coke production is only about 1.1.mn t/yr. This could help explain why battery anode producers have been seeking to test other coke qualities.

China's battery anode capacity investments have been bolstered by meteoric growth in lithium-ion battery demand, with China's production and sales of new energy vehicles continually setting new record highs and with battery-electric vehicle production up by more than 90pc on the year in January-November, with further strong growth predicted in 2023.

Despite the strong pace of expansion, battery anode materials demand is only projected to reach 2.9mn t/yr globally by 2025, up from 774,000t in 2021, if current trends in electric vehicle and other lithium-ion battery production hold, according to Rystad Energy. Argus Consulting forecasts global demand for graphite will rise to 5mn t/yr by 2032. Argus Consulting is a division of Argus Media. The group's forecasts and analyses are separate and independent of Argus' news and price assessment business.

If all of China's currently planned battery anode projects were to materialise, they would meet the world's projected demand in 2050, one trader said. Already by 2023, production will be more than double expected demand.

With producers becoming increasingly concerned the market will become saturated, investment has slowed, one producer said. Prices for anode materials had already fallen by more than 40pc by November from earlier last year.

But overcapacity may not be evenly distributed, as many new plants are only equipped to supply lower quality anodes, with the high-end artificial graphite anode market remaining "in tight balance," the producer said.

There are also projects under development outside of China, which may remain more viable even as the Chinese market becomes saturated, since companies and governments wish to diversify their supply chains. The US Department of Energy in October awarded $837mn in grants to companies focused on graphite and silicon anodes, including $150mn to Novonix to help fund its 30,000 t/yr synthetic graphite production facility in Tennessee. US independent refiner Phillips 66, the main producer of needle petroleum coke outside of China, acquired 16pc of Novonix and is partnering with the company to develop battery anode technology.

By Lauren Masterson

Chinese needle coke '000t

China synthetic graphite production by region '000t

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