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By volume, graphite is one of the most important elements in any EV battery ― there are between 50 and 100 kilograms of graphite, whether synthetic or natural, present within each vehicle.

“We can really see the sector growing progressively to around 15 times the demand we see today by 2030, outpacing moderate growth and demand from industrial applications,” Miller said.

That said, it's important to note that only certain types of natural graphite supply are relevant to the lithium-ion supply chain and can be qualified for it.

“This is really the biggest challenge in using natural graphite as a battery input,” Miller said. “This has the potential to exclude further capacity from projects in development.” The expert noted that if all planned supply reaches the market, it would have the potential to balance out demand up to 2029 to 2030, but with these limitations on which material can be qualified, the story takes a different direction.

“The primary limitation here is that the mesh size inputs for the battery supply chain must be fine to medium flake,” Miller said, adding that consistency and high purity, somewhere around 94 to 95 percent carbon, are also key. “Flake graphite for the lithium-ion supply chain must have low levels of impurity in order to avoid compromising the quality and longevity of the end product.”

According to Benchmark Mineral Intelligence, synthetic graphite anodes today account for the majority of market share and approximately 57 percent of the anode market.

“Going forward, we do expect this to shift in the direction of natural graphite anodes to around a 50/50 balance for a multitude of reasons,” Miller said. Those reasons include tight graphitization capacity, higher costs for synthetic graphite anode material and the current environmental shortcomings of the synthetic graphite supply chain.

Graphitization is the process of producing synthetic graphite from carbon-rich, oil-derived feedstock raw materials, and this process is energy intensive.

“In China, graphitization capacity has been mainly located in Inner Mongolia, a province which has some of the lowest energy costs in the country and where other high-energy metal producers, such as ferro-chrome smelters, are based,” Fastmarkets analysts explained in a recent report. “But Inner Mongolia was the first in the firing line when the 2021 energy crisis unfolded.”

This resulted in reduced production and unpredictable cost increases for synthetic graphite, and is the reason why many battery manufacturers in China could turn to natural graphite instead.

Looking ahead at how overall demand for graphite will perform, Benchmark Mineral Intelligence expects the battery segment to challenge industrial applications as the leading end market for graphite demand. Over the next decade, anode demand will grow at an average of 27 percent compound annual growth rate (CAGR). “Unlike some of the other critical mineral markets, there is still time for both the natural and synthetic graphite market deficits to be redressed — so long as adequate funding is provided for junior miners in the near term,” Miller said.

Commenting on price performance, Fastmarkets maintains the view that both flake and spherical graphite prices will trend stable to higher in the near term.

“The only potential reprieve we see for graphite prices would be if the power constraints diminish EV lithium-ion battery production, and in turn reduce demand for graphite anodes sufficiently to stem the upward pressure on graphite prices,” analysts at the firm said.

Another key trend for graphite investors to watch in the new year is how western automakers keep up with China, which has become the dominant player in all steps of the anode supply chain.