New graphite production from Brazil assigned to the USA

News Analysis




New graphite production from Brazil assigned to the USA

Under two separate offtake agreements, South Star and Graphcoa have agreed to supply graphite concentrate to US battery anode producers. 

Two Brazilian potential graphite producers have announced supply agreements, with a significant portion of their output to be delivered to the USA for further downstream processing to produce battery-active anode material. South Star is set to commence natural graphite production from its Santa Cruz mine project in Q3 2024 and has already executed a binding sales agreement with a “US client” for an initial purchase of 100t of graphite concentrate. Once operational, South Star plans to focus on a six-month commissioning and ramp-up period, aiming to begin commercial sales in September 2024 and reach phase one full capacity of 5ktpy by Q4. The company signed a five-year supply agreement with Graphex in 2022, and 50kt of graphite concentrate will be provided from South Star’s Santa Cruz project in Brazil and Ceylon (BamaStar) project in the United States. To meet the terms of the supply agreement, South Star has already secured five mining licences at Santa Cruz for two expansion phases scheduled for 2026 and 2028, respectively, producing 25ktpy and 50ktpy.

Meanwhile, Graphco received a US$70M investment from its JV partner Appian Capital in May 2024 for its Boa Sorte mine in Bahia, Brazil. The funds will be used to develop the project’s graphite concentrate plant with a planned production capacity of 5.5ktpy. By 2025, Graphco expects to submit the graphite concentrate produced for quality assessment to its customers, including its joint development (JD) partner Urbix. Both companies entered a strategic investment and JD agreement in late November 2023, and Urbix has agreed to build and operate a commercial-scale coated spherical purified graphite (CSPG) processing facility in the USA.

In terms of global supply, Brazil is the fourth-largest graphite producer, and in 2023, the USA was Brazil’s second-largest natural graphite importer, accounting for 22% of its total trade. In the long-term, new supply from both projects is set to assist the USA’s domestic battery-grade graphite demand. However, Brazil has no free trade agreement (FTA) with the USA, meaning graphite produced in the country does not currently qualify for USA EV subsidies. In the interim, the EU is negotiating an FTA with Brazil as part of the EU's Association Agreement negotiations with the Mercosur countries (which also include Argentina, Uruguay and Paraguay).