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3/14/14, "How Tesla Motors Inc’s electric car batteries are adding to China’s pollution woes," Bloomberg, Elisabeth Behrmann
"As more environmentally conscious Americans do their bit to help
clear the air by paying up for an eco-friendly Prius or a sporty Tesla, a
damaging form of polluted rain is falling in China.
The link is graphite, a vital component in batteries used in Tesla’s
Model S, Toyota’s plug-in Prius and other electric cars, as well as in
electronic gadgets including iPhones. It’s mostly mined and processed in
China where graphite pollution has fouled air and water, damaged crops
and raised health concerns. Now, in response, Chinese authorities are
closing dozens of graphite mines and processors in a bid for cleaner air
even as global demand for the commodity is surging.
“There’s little question that the Chinese are between a rock and a
hard place environmentally,” said Josh Landess, an advanced
transportation analyst with Bloomberg New Energy Finance. “There’s an
obvious irony that the disruption it’s causing is within the clean
vehicle and transportation industry.”
The graphite outcry is the latest among environmental flashpoints in
China that have ranged from lead poisoning to acid spills and
“unbearable smog” in big cities. And while the clampdown may help
improve the quality of China’s environment, it could also affect as much
as a third of worldwide production.
Analysts disagree about the impact of a sharp decline of graphite
supplies. Simon Moores, a London-based senior analyst at Industrial
Minerals Data sees China’s tougher stance pushing graphite prices up as
much as 30% this year. Others say even that rise would have an only
minimal impact on the overall price of electric cars though it could
slow the expected long-term decline of battery prices....
To keep up with demand, Tesla plans to invest US$5 billion building a
factory to produce battery packs for its luxury electric cars, it said
last month. The project, dubbed the “gigafactory,” would be the world’s
largest such operation, according to Chief Executive Officer Elon Musk.
Each electric car contains about 50 kilograms (110 pounds) of
graphite. Hybrid cars use about 10 kilograms, e-bikes 1 kilogram,
laptops about 100 grams and mobile phones about 15 grams, according to
Anthony Pandolfo from Monash University’s department of materials
engineering. The growth and diversity of electronic devices will propel
demand for rechargeable batteries, according to Lux Research.
Tesla’s factory alone could double demand for graphite in batteries,
requiring the equivalent of six new mines to come into production,
according to Industrial Minerals’ Moores. Battery makers include Sony
Corp., Panasonic Corp., Samsung Electronics Co. Ltd. and NEC Corp.
Instead, China is cutting back production as it battles more damaging
environmental issues stemming from its reliance on coal for electricity
and conventional automobiles.
As many as 55 graphite operations were suspended in Shandong
province, which controls 10% of global supply, in December last year on a
range of environmental breaches. The government intervention could
easily extend to other poorly-run producers in Heilongjiang Province,
said Credit Suisse Group AG analyst Michael Slifirski.
More damaging than the graphite rain, the silver dust that falls from
carelessly managed mines, is the hydrochloric acid used in China to
process raw graphite into a usable form. The acid is highly corrosive
and when released untreated as waste water into the environment is
harmful to all forms of life.
No significant new mines have been added outside China since the
1980s, according to Industrial Minerals. That’s about to change. Concern
about diminished supply from China is prompting a rush to secure other
sources, including the Uley graphite mine in Australia that’s due to
re-open this month after being shuttered for more than two decades
because of rising output from China that depressed prices.
The demand for lithium-ion batteries, which use graphite, will drive
up the total value of the rechargeable battery market by 52% to US$41
billion by 2018, according to Cosmin Laslau, a Boston-based analyst at
Lux Research Inc.
The lion’s share of growth will come from products such as Apple’s
iPad and Amazon.com Inc.’s Kindle, as well as smart phones, Laslau said
in a presentation.
A spokesman for Toyota, the world’s biggest carmaker, said in an
e-mail that it is “important to maintain a stable supply of any raw
material, and we work with our suppliers to do so.”
Tesla, Apple, Panasonic and Sony declined to comment on the potential
effect of higher graphite prices for its batteries and production
practices in China.
Seiichiro Toda, a Tokyo-based spokesman for NEC, said prices hadn’t
increased at this point. Samsung said it didn’t expect an impact from
capacity closures in Shandong province.
Bayerische Motoren Werke AG last month said it had 11,000 orders for
its fully electric four-door i3 car, while BYD Co., the Chinese
automaker backed by investor Warren Buffett’s Berkshire Hathaway Inc.,
is preparing to begin U.S. production of electric buses in March.
China’s graphite pollution crackdown is raising concern among battery
makers over supply security, according to Chris Darby, chief executive
officer of Valence Industries Ltd., the developer of the Uley in South
Australia. The company already has commitments for initial output from
stockpiles, he said.
“They can see demand growing,” Darby said. “They want certainty of
supply, and they’re uncertain about the supply that’s coming out of
China, or any of the other regions around the world.”
A 30-percent increase in graphite prices could increase the price of
battery packs for electric vehicles by as much as 5%, according to Brian
Warshay, a New York-based analyst for Bloomberg New Energy Finance.
“It would slow the expected decline in battery prices,” he said in an interview." via Climate Depot
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