Why underinvestment in ex-China anode supply chains could make...

Why underinvestment in ex-China anode supply chains could make graphite exception to new FEOC rules

If the proposed FEOC rules are applied, almost no batteries produced in the US will qualify for the 30D tax credit in 2025. Given the extended qualification periods for anode suppliers, typically three to five years, it would be a challenge to replace current anode suppliers before 2027. Furthermore, it appears to be extremely challenging for battery producers to find reliable suppliers of qualifiable anode material at a commercial scale.

In response, major battery producers and OEMs have proposed classifying graphite as a low-value material, which would exempt it from the application of FEOC rules until January 1, 2027. Some OEMs have directly suggested graphite be temporarily excluded from the FEOC rules. This action has faced resistance from North American graphite producers.

Development of anode capacity in the US and in other countries outside China has lagged behind gigafactory expansions. The main issue for the Western anode ecosystem has been underinvestment in both mining and processing capabilities due to ample supply from China and the relatively low price of anode materials compared to cathode materials. Neglect of anode production has created a vicious circle in which Western battery producers remain dependent on Chinese anode supply, while potential anode producers outside China struggle to obtain finance and to secure offtake agreements at prices that would enable returns to their investors.

If the EV supply chain in the US is to avoid a lithium pricing scenario in North America over the next few years, significantly higher investment in the anode supply chain will be essential.

https://www.fastmarkets.com/insights/why-underinvestment-anode-supply-chains-could-make-graphite-exception-to-feoc-rules/