Here’s a fun fact you may not know: The “lead” in the ubiquitous No. 2 lead pencil is not lead at all, but graphite, with a little clay mixed in—probably a lucky thing for generations of pencil-chomping grade-schoolers. But the low-end use of pencil is only one small segment of a large and growing list of industrial and manufacturing uses for graphite. And with the advent of new high-tech and “green” energy technologies, graphite may be the new essential mineral in the not-too-distant future.

Graphite is one form of, or allotrope of, carbon; diamond is another. In nature, graphite takes three forms: crystalline, or flake graphite; amorphous or fine particle graphite; and lump or vein graphite, which is most rare and closest in hardness to diamonds.

Graphite has been used by humans in one way or another since the stone age. It conducts electricity, is a natural lubricant, and is resistant to very high temperatures. Natural graphite has long been used in refractories—heat-resistant liners for industrial equipment such as blast furnaces, batteries, steelmaking, brake linings, foundry facings, lubricants—and pencils.

Historically, uses of graphite have expanded along with technology. The iron and steel industries have been the primary consumers of graphite for the past century. The use of graphite in batteries generated a huge spike in demand in the 1980s and 1990s, as humans became more and more enamored of the latest-and-greatest new electronic gadgets. One sector seen as a growth area for graphite is in fuel cells for electric cars. It takes 20 to 30 times more graphite than lithium to construct a lithium battery, according to Spain’s REVE project promoting the development of electric vehicle infrastructure; the Li-ion battery in the fully electric Nissan Leaf is said to contain nearly 40 kg of graphite, according to the National Graphite Corp. While the market for electric vehicles is tiny today, with the world arguably already at “peak oil,” demand for alternate propulsion technologies is bound to grow. As rare metals expert Jack Lifton writes in ResourceInvestor.com:

It is projected that by 2020, these types of automobiles will represent 5-18% of all sales and almost exclusively be powered by lithium-ion batteries, which are both lighter and more powerful than nickel-metal hydride ones. With 70 million vehicles forecast to be sold in 2020, vast amounts of graphite will be required to manufacture the lithium-ion batteries that will power many of them.

Lithium batteries use the higher-quality flake graphite, which comprises about 40% of the total 1.1 million tons of natural graphite produced each year. Lithium batteries also use synthetic graphite, but because the synthetic costs significantly more to produce, the demand for naturally occurring graphite is expected to grow along with the market for hybrid and electric vehicles. (About 4% of total graphite production is used to make “lead” pencils, which use low-quality amorphous graphite, primarily from China.)

An even more leading-edge technology is the growing use of fuel cells, Lifton continues:

Emerging fuel cell technologies also rely heavily on graphite. One of the more promising types under development, the proton-exchange-membrane fuel cell, requires 100 pounds of graphite per vehicle. Fuel cells will also be used for stationary power generation, as utility providers seek to overcome the inherent inefficiencies around electricity transmission to remote locations.

But perhaps the most exciting potential for graphite is its use in research-stage nuclear reactors. Just as liquid fluoride thorium reactor (LFTR) technology offers promise for a safer, less costly energy source (see our WealthCycles.com article, Innovation Within the Kondratiev Winter), the pebble bed reactor, a so-called Generation IV reactor also currently under development, offers a less costly fuel source than the solid-fuel water-cooled reactors in use today.

The pebble bed reactor, or PBR, uses tristructural-isotropic (TRISO) fuel particles composed of uranium coated with several layers of carbon material, then encased in tennis-ball-sized graphite pebbles. The fuel pebbles, which are cooled by gas, are designed to remain stable at extremely high temperatures, eliminating the need for redundant safety measures.

Although the PBR was invented in the 1940s, it was not studied widely until the 1960s and has remained an experimental technology. The only one currently in operation is the HTR-10, built in 2000 at China’s Tsinghua University; the reactor came online in 2003. China also has 28 conventional reactors under construction now (all of which use graphite).

As is the case with rare earths (see this week’s WealthCycles.com article, Abundant Rare Earth’s Could Be Energy Future), China has been a dominant supplier of graphite. Currently, China produces approximately 80% of the world’s graphite, according to minerals expert Simon Moores. Other estimates are that China that retains approximately 60% of the graphite it produces for domestic use. Moores says China does not formally restrict graphite exports but is developing industries to use graphite in high-profit end products, such as batteries.

Some analysts have cautioned about volatility in the graphite market, similar to the bubble and bust that occurred recently with rare earths. However, unlike rare earths, large deposits of graphite are found in other parts of the world, including Canada. “China is aware that companies can get graphite elsewhere,” Moores said in an interview with The Critical Metals Report. “It is also aware that at the moment it makes good business sense to sell quality raw material at high prices for the short term. Longer term, the story is different.”

Should China ease up on graphite export limitations, the price, currently in an upswing, could crash. But China’s domination of current production also is spurring development of graphite production in other parts of the world. Perhaps in part due to its potential as a future fuel source, both the European Commission and the U.S. Department of Homeland Security list graphite as a critical material.

The current global glut of cheap credit and debased currency is likely to feed bubbles and busts in many “hard” commodities, including rare earths and graphite. If graphite turns out to be the “petroleum” of the future, it will be a lot easier to purchase some with real money, gold and silver, than with what will surely be worthless pieces of paper by the time that day arrives.

https://wealthcycles.com/blog/2012/06/08/graphite-emerging-technology-offers-future-energy-security