As Canberra marks a radical foreign policy shift amidst soaring tensions against China, Australia is trying to dethrone China in a key sector in the foreseeable future- electrical vehicle manufacturing. Currently, China is dominating the Lithium-ion batteries (or LiBs) production which is critical in the Electrical Vehicle (EV) market.
China has been able to emerge as a world leader because of two reasons- one, it accounts for 73 per cent of the world’s lithium cell manufacturing. And two, leadership in graphite manufacturing. The Asian giant produces 70 to 80 per cent of the world’s graphite and 100 percent of the natural graphite used in LiBs. In terms of weight, graphite is the second-largest component in LiBs and the batteries contain 10-15 times more graphite than lithium. The anode in LiBs is actually made up of Graphite.
Australia, however, is about to challenge China’s near-monopoly in graphite production. Syrah Resources, an Australian listed minerals company, has unveiled a graphite processing facility in the South-eastern US state of Louisiana. This facility will help the Australia-based company to turn the graphite extracted from Mozambique to be processed for LiB anodes.
This is an ambitious project on Syrah’s part. The company wants to become the first major player of the LiB anode material outside China. Syrah says that the long production chain starting from Africa to North American and finally reaching automakers around the world wants to provide “an option for geographic diversification.”
Syrah Resources is not alone. Another Australian company, EcoGraf Limite, wants to fire up a graphite processing facility in Western Australia by 2022 at the earliest. EcoGraft too is trying to play big. The company has already signed a non-binding Memorandum of Understanding (MoU) with German technology group Thyssenkrupp,
EcoGraf too is looking to create a new supply chain, as the graphite extracted in Tanzania would be processed down under and finally shipped to Thyssenkrupp as anode material. The company aims to start shipping 2,310 tons of anode material to Thyssenkrupp in the first active year of the processing facility’s operations. By the third year, it wants to export 10,020 tons of processed graphite. This would be sufficient to power as many as 3,70,000 electrical vehicles.
EcoGraf plans to eliminate the use of hydrofluoric acid, which is both costly and environmentally hazardous. This will help the Australia-based company beat its Chinese competitors in their own game. The entry of Australian rivals is being welcomed beyond Australia too.
Asia Nikkei has quoted a Japanese industry source as saying, “Establishing a supply chain outside of China is a huge deal.” A source from Mitsubishi Chemical Holdings, a Japanese company said, “Our anode material is dependent on China for [graphite], but we plan to also procure from outside of China.”
Japanese companies are eager to procure non-Chinese graphite. Another Japanese company source said, “Clients are saying they wish to use graphite from outside China.”
There is an ample rise in the prices of graphite in countries using it for the production of Electrical Vehicles. As per Japan Oil, Gas and Metals National Corp., the prices of the strategic commodity have also doubled in China over the past 10 years.
The rising demand for graphite and rising prices are pushing non-Chinese players to join the game. Currently, the world’s top three anode manufacturers are Chinese and Australian companies now want to occupy the extra space that is being created.
China could try to wage a price war in order to gain an upper hand over the upcoming Australian companies. An industry source said, “There’s the potential of [China] stepping up supplies and bringing down prices to drive foreign rivals into a corner, just like they’re doing with rare earths.”
But the backlash against China is something that can help Australia in its fresh initiative. The free world, including Canberra, wants to cut reliance on China. Australia itself has been handling a belligerent China. After Australian Prime Minister Scott Morrison’s fervent appeal for an international inquiry into the COVID-19 Pandemic, Sino-Australian relations have gone downhill.
Australia had a lot to do with China. It shares a trade surplus with China and is heavily dependent on Beijing for fuelling its exports. But Morrison has realised that it is not prudent to remain dependent on the Dragon, given the manner in which China imposed steep tariffs on Australian Barley and meat. Moreover, China constantly uses un-diplomatic, bellicose language against Australia.
Australia has thus started reducing dependence on China. It has attempted to prevent hostile Chinese FDI in the country, apart from strongly considering reclaiming its Darwin port from China.
China weaponizes economic dependence. In 2010 also, it had cut Japan off rare earth metals supplies over a territorial dispute. Tomorrow, if China picks up new fights, it would want to suddenly block graphite supplies to some other countries.
Australia wants to create a viable alternative and dethrone China’s virtual monopoly in the LiB anode materials sector. This is going to block Beijing’s ambition of becoming a world leader in the Electrical Vehicles market.