Blogs

Can lithium-ion anode demand for needle coke reduce availability for electrode players?

  • What is needle coke?
  • Uses of needle coke
  • Lithium-ion battery manufacturers demand needle coke

 

Needle coke?

Needle coke is a specialised form of petroleum coke that is derived during coke production from coal tar or as a by-product of the oil refining process. Needle coke is a high technology intensive product and is manufactured commercially on a large scale by only 4 companies globally, which are Phillips 66, C-Chem Co. Ltd., Mitsubishi Chemical Corporation and JXTG Nippon Oil & Energy (the 5th player Seadrift Coke LP is a subsidiary of GrafTech International and does not engage in commercial sales of its needle coke output). Chinese producers engage in low quality of coke production which is not utilised internationally.

Further, needle coke is used for the production of synthetic graphite and it is the only suitable material for manufacturing of the highest quality, 99% plus pure graphite through graphitisation process. Synthetic graphite primarily finds application in UHP grade graphite electrode manufacturing, which, in turn, is consumed for steel manufacturing through electric arc furnace (EAF) route. Globally, excluding China, the high-grade needle coke capacity is ~750 thousand tonnes and the capacity additions were limited over the years due to a subdued demand from the EAF steel industry. Furthermore, an incremental capacity addition (barring debottlenecking initiatives at existing plants) have a long gestation period of more than 2 years, which limits the potential of incremental supplies in the market in a short span of time.

In the past, almost all of the needle coke demand emanated from graphite electrode industry. However, owing to the cyclical nature of the industry and a low demand situation, the leading needle coke manufacturers started working with other industries to explore alternative applications for needle coke. Presently, ~75-80% of all needle coke supplies are absorbed by the graphite electrode industry, while the remaining is being consumed by the lithium-ion battery manufacturers and speciality carbon industry. Although, these industries generally keep swapping among natural and synthetic graphite, which depends on the availability, relative price, grade consistency and purity requirement. Whereas, graphite electrode manufacturers are solely dependent on the needle coke to manufacture UHP grade electrodes.

Demand from lithium-ion battery manufacturers

Graphite is the most suitable material used for making of lithium-ion battery anodes. However, other metal substitutes for anodes create severe problems such as expansion, restricted life, high-cost and safety concerns. Moreover, either natural or synthetic graphite powder can be used for manufacturing of anodes, which forms fine compatibility with the lithium-based cathodes. There are differences in the characteristics of the battery formed with any of the material, but these are largely negligible. Natural graphite anodes have higher initial use efficiency, while synthetic graphite anodes have a better cycle and safety performance.

In a lithium-ion battery, the cathode and electrolyte costs form roughly 50 and 25 percent of the total cost of production, while the graphite anode costs around 10 percent of the total cost of production. A small subset of battery manufacturer produces battery anodes employing synthetic graphite whenever a specific battery design need arises. Traditionally, a higher cost of synthetic graphite as compared to natural graphite has set the trend for large battery manufacturers to prefer natural graphite, thereby, maintaining a low percentage cost of anodes in the total battery production cost. 

Additionally, the end choice for graphite source to produce anode mainly depends on the relative price of natural and synthetic graphite in the market. Further, given the abundant availability of natural graphite in the global market with estimated international reserves exceeding 800 million tonnes of recoverable graphite, natural graphite is a very lucrative replacement and hence, is a primary choice for most of the graphite consuming industries. The lithium-ion battery industry is targeting for a widespread acceptance of its batteries world over and thus, it is aiming to make battery prices more competitive. This has fixed their preference on the natural graphite as a favoured source of raw material for the anode.

In addition, during 2012-17, needle coke prices collapsed due to a weak demand from the graphite electrode industry and a fall in the crude prices. The prices declined to below $1,000 per ton making needle coke more competitive for use in synthetic graphite anodes for batteries as an alternative to the preferred natural graphite. This created a reliable incremental demand for needle coke from a large and expanding lithium-ion battery industry.

Although the global graphite electrode manufacturing industry was unaffected with the diversion of its key raw material (needle coke) to other industries as the graphite electrode industry itself was reeling under demand slowdown from EAF steel industry. However, the graphite electrode industry witnessed a sudden surge in demand in the second half of 2017, which is anticipated to continue in few upcoming years. The sudden rise in demand from graphite electrode resulted in a high requirement of needle coke, the supply of which is limited and other industries were also vying for a share in the pie. The scenario has completely reversed in the course of few months, graphite electrode manufacturers (traditional consumers of needle coke) are competing with lithium-ion battery manufacturers for needle coke and hence, are holding back capacity expansion plans in the wake of uncertainty over needle coke supply to the graphite electrode industry.

Televisory believe that the diversion of needle coke to lithium-ion battery manufacturing industry will be curtailed in 2018 and also in the near-term as sharp spikes in needle coke prices have made it less lucrative in relation to the natural graphite. Needle coke prices exceeded $3,000 and made it more expensive for use as compared to the natural graphite, which is currently priced at $1,850 (for a high purity XL natural graphite). A continuous use of synthetic graphite under the current prices will result in an erosion of margins for battery manufacturers or this will lead to a jump in the prices of lithium-ion batteries prices.

Another key factor which Televisory trust will restrict the diversion of needle coke to the lithium-ion battery industry is the ongoing R&D attempts to utilise graphene (a derivative of graphite) for batteries, which is projected to improve its capacity and output exponentially. Graphene’s use in lithium-ion batteries will boost the present storage potential as the performance will improve significantly. Natural graphite is the main source which is feasible for graphene production and synthetic graphite is not a suitable base. This builds a strong belief that natural graphite’s use in the battery industry would outpace needle coke-based synthetic graphite use in the future. This, in turn, will shift the demand from battery manufacturers to more economical natural graphite anodes as they attempt to improve the pricing dynamics of lithium-ion batteries to inculcate a wider acceptance in the world economy. Thus, Televisory expect a decrease in the demand for needle coke from the lithium-ion battery industry going forward. This is likely to free up needle coke supplies, which are extremely tight at the moment for the graphite electrode industry, which is witnessing a strong rebound in the demand for electrodes from EAF steel manufacturers.

Your Rating

Tire manufacturing industry, analysing the cost and margin trends

The global market for tire manufacturing stands at $180 billion. Michelin anticipates the long-term demand to rise at the rate of 5 to 10% a year in developing markets and 1 to 2% a year in mature...

Failure of Amazon in China, an analysis

E-commerce market in China Online consumer product retailers in China Performance of Amazon in China   Amazon is a global e-commerce player selling a wide...

An analysis of Malaysian rubber glove industry

How big is the international rubber gloves market? Reasons behind the healthy and steady growth Malaysia’s role in the industry Why are companies struggling for stable...

Rapidly growing Indian online food delivery industry and its unrealised profits

Evolution of online food delivery industry in India Geographical penetration and scope for expansion Key players and their zeal to balance revenue and costs   Online...

Can lithium-ion anode demand for needle coke reduce availability for electrode players?

What is needle coke? Uses of needle coke Lithium-ion battery manufacturers demand needle coke   Needle coke? Needle coke is a specialised form of petroleum coke...

Is the radio broadcasting industry in the U.S. dying? An analysis

Radio, the most powerful medium of reach in the U.S. Why the industry is moving at a slow pace? Radio’s health is still sound, will it continue in the long-term?   ...

Sri Lankan economic and political crisis

Sri Lanka’s latest political crisis, who governs the nation? Poor economic indicators adding to the nation’s woes   Sri Lanka is currently embroiled in a political crisis,...

Carbon black industry, strong potential for supernormal profitability?

What is carbon black? Its uses Impact of the environmental curbs in China   What is carbon black? Carbon black is a fine carbon powder and it is a disorderly...

Blockchain, an emerging concept, a disruptive technology (Part 1)

What is blockchain? How is blockchain revolutionary? Cryptocurrency, the new money ICOs, the new way of raising money Summary Blockchain is a software architecture...

Housing finance market in India. Is affordable housing driving the growth?

Overview of the housing finance sector in India Key players dominating the segment and their dynamics Factors driving aggressive demand for housing   The housing...

Rice industry outlook 2018

Major rice producers and consumers Global rice trade Factors dominating the trade   Rice is the 3 rd largest produced agricultural commodity in the world, after...

Indian wood panel industry, growth drivers and present trends

Current market scenario in the Indian plywood industry Growth in the housing sector and rapid urbanisation to provide the boost GST rationalization to reduce price difference...

Rise of Ant Financial, will the success story continue?

What is Ant Financial? Journey to become king of unicorn Will regulatory curbs hinder its success journey?    Ant Financial, an affiliate and integral part...

Baidu’s Apollo, the underdog of autonomous driving platform

Overview of the autonomous vehicle sector in the global automobile industry Search giant Baidu’s entry into the autonomous driving space Baidu’s approach in becoming a front-runner...

Malaysian rubber glove industry, an update

Rising global demand for gloves Impact of USP 800’s implementation and the US-China trade war on Malaysia’s rubber gloves industry Key challenges for the Malaysian rubber...

Unnoticed growth of the media and entertainment industry in India

Overall industry brief Growth of the M&E industry and its segments Major supporting elements of this growth   Media and Entertainment (M&E) is a very wide industry...

Battle for the textile and apparel industry in Southeast Asia

The reasons for China’s decreasing presence in the industry Initiatives by the governments in Southeast Asia to boost the textile trade Vietnam and Bangladesh’s quest to conquer...

OYO Rooms, an Indian start-up to enter Japan

Growth story of OYO Rooms in India Business model of OYO Rooms Analysis of strategy to enter Japan   OYO Rooms, the Indian start-up has decided to venture in Japan...

What’s in store for India’s first commercial REIT as it hit the market with Blackstone teaming up with Embassy Group

Overview of the partnership and assets of Embassy Office Parks Comparison of the Indian commercial office market space with other developed markets Road ahead for India’s...

German economy, will the slide continue?

Weakening global industrial demand weighs on Germany’s manufacturing sector Inflation and business climate take a hit with broader signs continuing to be subdued Future...