Former president Donald Trump's re-election is sparking uncertainty in the US' synthetic graphite battery sector, with companies worried about a possible halt to government finance and a weaker outlook for domestic demand.
"With Trump being elected president, everything's up in the air," one industry source said.
Battery materials companies expecting to receive government funding to build plants in the US could see their prospects dim with Trump coming into office, since these companies need the federal grants to compete with China, a second source said. Trump on the campaign trail said he would rescind all unspent funds in President Joe Biden's Inflation Reduction Act (IRA) and scrap Environmental Protection Agency tailpipe standards, which he called an electric vehicle (EV) "mandate".
The Biden administration is racing to try and secure projects set to be funded by the IRA. On 16 December, US battery materials producer Novonix received a conditional loan for up to $754mn for a new synthetic graphite plant from the US Department of Energy (DOE). If finalised, the loan would be used to build a new 31,500 t/yr synthetic graphite plant in Tennessee by the end of 2028. DOE previously awarded Novonix a $100mn grant and a $103mn tax credit to expand capacity at its Tennessee plant to 40,000 t/yr by 2025 and 150,000 t/yr by 2030. DOE on 16 December also closed on its up to $9.6bn loan to South Korean battery manufacturer SK On for the construction of three battery plants in the US, the largest loan ever awarded under its Advanced Technology Vehicles Manufacturing Program.
DOE also in September selected SKI US, part of India-based Birla Carbon, to receive $150mn build a 25,000 t/yr synthetic graphite production plant in South Carolina.
Some in Trump's orbit have warned they will review contracts they view as hastily pushed out before the former president takes office. But some Republicans are likely to oppose full repeal of the IRA, since the bill funds projects in their districts. And Republicans will hold a razor-thin majority in the House of Representatives.
Even if Republicans do not repeal the IRA or other EV subsidies like tax credits, the uncertainty surrounding the new administration's support could be a stumbling block.
"Who's going to put half a billion dollars into a battery plant right now when you don't have certainty on the push for EVs?" the first source said.
Battery projects require huge amounts of investment. Swedish battery maker Northvolt obtained record venture capital investment for a European start-up at $15bn. But on 21 November, the company filed for Chapter 11 bankruptcy protection in the US, in part because of difficulties "bridging financing between different stakeholders", outgoing chief executive Peter Carlsson said. The company had already closed down its R&D facility in the US and put plans for factories in Canada, Germany and Sweden on hold. Its financial woes intensified after the Swedish government declined to invest.
Other European governments have already reduced financial support for EVs, more for spending reasons than policy, which has softened demand in the region. France recently changed eligibility requirements for subsidies, and Germany ended its subsidy late last year.
Some companies, like Norwegian battery materials company Vianode, have been planning multi-billion dollar investment programmes to expand their reach in the automotive industry throughout North America and Europe. It is not clear if Trump's election will have an effect on these plans. Vianode opened its first anode graphite production plant, Via One, in Herøya, Norway, in October. The plant will have a capacity of 2,000 t/yr, enough to supply 30,000 EVs annually, according to Vianode.
Chinese firms have scaled up production of key battery materials at all stages of the supply chain, creating more competition for European and US producers. Chinese producers dominate the global EV market with about 70pc of market share, even as the EU and US have put policies in place to try to support their domestic industry.
China's lithium-ion battery exports to the US jumped in November as suppliers looked to get ahead of potential new tariffs. The Trump administration is likely to increase tariffs on Chinese lithium-ion batteries to as much as 60pc in the coming few months after Biden earlier this year lifted them to 25pc from 7.5pc. This could help support US-based battery plants. But tariffs on Chinese goods could also present additional challenges, as the raw materials for synthetic graphite often have some Chinese components.
Needle coke, traditionally the main raw material for synthetic graphite used in battery anodes, is not widely produced outside of China. And while companies in China have been researching options for using a wider range of petroleum coke qualities, specifications are still relatively narrow, with battery companies in China absorbing most of the world's suitable coke. One graphite anode plant in Europe has been struggling to procure petroleum coke, according to a market participant.
Sourcing coke for synthetic graphite in Europe and other ex-China locations is likely challenging, as most of these refineries and calciners have tied up their supply in long-term commitments, one producer said. Refineries are also reducing coke production, as the required feedstocks have become more costly.
