http://www.moneymorning.com.au/20120427/why-graphite-is-the-high-...

http://www.moneymorning.com.au/20120427/why-graphite-is-the-high-tech-commodity-of-the-future.html

Beyond Pencils

I’m talking about FLAKE GRAPHITE.

The word graphite may make you think of pencils. But the reality is very different!

With new technologies creating new levels of demand, and little flake graphite being available, this strategic mineral has a big future.

Graphite is a form of carbon with unique properties. It is like a diamond in two dimensions.

It’s important I make the point upfront that most of the world’s graphite is ‘amorphous’. This is used mostly for equipment in the steelmaking industry, and may as well be a different commodity to flake graphite.

Comparing amorphous graphite to flake graphite – is a bit like comparing thermal coal to coking coal.

The rarer, high-quality type of graphite to invest in is ‘FLAKE’ graphite.

Flake graphite production levels are just 400,000 tonnes a year. Analysts at Investment Bank, Canaccord, report that demand from lithium-ion battery manufacturers is increasing at 20% a year.

And you can see why. Uptake has been slow thus far, but the US still plans to put 250,000 electric cars on its roads each year by 2015. China wants to put a million electric cars on Chinese roads each year in the same period. With 50 kg of graphite going into the battery of each electric car, the market will need to find an extra 250,000 tonnes of flake graphite to keep up with this demand alone.

But it’s not just electric cars that have batteries…

The battery in your mobile phone contains graphite as well.

They may be much smaller than a car battery – but according to the International Telecommunication Union, out of a population of 7 billion people alive today there are 5.9 billion mobile phones in use around the world. That’s an incredible statistic. And by 2015, they reckon there will be MORE mobile phones in use than there are people on the planet.

In fact, any heavy-use electric gadget will have a graphite-filled battery. Electric cars mobile phones, your laptop computer, cordless drills, and electric toothbrushes….all these devices significantly increase the demand for flake graphite.

Based on this increased demand, the price of high quality flake graphite soared from US$1000 to $3000 a tonne in the last five years.

I’m convinced it has plenty more to run. Battery makers are not the only ones queuing up for flake graphite.

A new generation of nuclear reactors called ‘pebble-bed nuclear reactors’ use large amounts of flake graphite.

The reactors get their name from the pebble-sized spheres of graphite mixed with uranium they contain. This structure allows pebble bed reactors to produce power more efficiently – and safely – than conventional reactors. This technology means nuclear reactors can be smaller, and as easy to run as turning a switch.

Graphite demand from pebble bed reactors alone could be greater than current annual production by the end of this decade.

Electric batteries and pebble-bed nuclear reactors are two current technologies driving demand. In my view, these two applications alone are enough to justify a bullish long-term outlook. But “high tech” commodities are rapidly evolving. And more markets (with more demand for flake graphite) are already developing.

The Future of Graphite – Fuel Cells and ‘Graphene’

But the real future of graphite may lie in fuel cells.

According to the United States Geological Survey, fuel cells could create more demand for flake graphite than all other applications combined.

A fuel cell is like a large battery that produces power through chemical processes. You need to ‘refuel’ it from time to time. This fuel contains graphite.

This is not science-fiction. Fuel cells are already used to power phones, vehicles, and provide back-up power for buildings such as hospitals. Toyota plans full-scale commercial production of fuel cells within three years.

If fuel cells are the next source of demand for graphite, then graphene is the ‘blue sky’ for demand.

Graphene is a one-molecule-thick sheet of graphite.

The carbon molecules line up in hexagons. Close up it would look like chicken wire. It is stronger than diamond, is more elastic than silk, and conforms to any shape. It conducts electricity at the speed of light, and can transmit 1000 times the electric current than copper. This amazing material is quite new to science, and we are still working out its potential applications.