Growing demand for graphite from Sri Lanka as an alternative to China

This is a mineral needed for the production of batteries for electric cars. A recent study recommends trade agreements with the US taking advantage of the current geopolitical situation, but India has also shown interest in developing the industry, which had boomed in the period between the two world wars. However, only 2,792 tonnes were exported in 2023.

Colombo (AsiaNews) - France, India, China and the United States are attracted to Sri Lanka's graphite deposits, where Canadian and Australian companies are already involved in exploiting the rich deposits. These countries are looking for an alternative to importing the mineral from China.

A study by the Sri Lankan Institute of Policy Studies (IPS) highlighted the island nation's comparative advantage in graphite exports, despite modest production and higher prices than in China. The study also recommends the signing of a free trade or minerals trade agreement with US partners in particular.

Indeed, the spread of electric cars offers an important opportunity for Sri Lanka to revive the graphite industry, which prospered during the two world wars with 35,000 tonnes of annual exports. Today there are an estimated 1.5 million tonnes, which is not enough to meet US demand.

The recently established Chamber of Mineral Exporters has emphasised the importance of well-defined policies to realise the potential of Sri Lanka's mining sector. At present, the domestic graphite production is 5 thousand tonnes, while according to the Board of Investment, the potential annual production capacity can be as high as 450 thousand tonnes. Indeed, Sri Lanka can extract the best form of natural graphite in an environmentally friendly manner and should use the opportunity to meet the global demand for graphite ‘of non-Chinese origin’.

Scholars Mahesha Hewapathirana and Asanka Dissanayaka explained to AsiaNews that ‘Sri Lanka mines high-quality graphite that is distinguished by its remarkable purity, flawless crystal structure, and strong electrical conductivity suitable for various commercial uses. However, in 2023, only 2,792 tonnes were exported, with a turnover of about million.’

‘Graphite,’ they continued, ‘is one of the main materials in lithium batteries, which are critical for electric vehicles, which is why the US Department of Energy classifies graphite as a critical mineral. Current projections indicate that global demand for electric cars will rise to 40 million units by 2030. Ensuring the use of sustainable and reliable raw materials is a priority for the US as it seeks to diversify its sources of ore (cobalt, nickel, lithium, graphite) other than China’.

According to the Director General of the Geological and Mines Survey Bureau, Ranjith Premasiri, foreign investors with a strong interest in this sector include Indian and Chinese companies. Initial talks have already been held with senior Indian government officials to assess the possibility of expanding the graphite industry and to collaborate on the development of exploration and mining technologies, including the use of advanced techniques to reach deeper graphite veins. 

Meanwhile, however, the mining industry faces several challenges, including the transparency of the process of obtaining mining permits from the relevant authorities, which discourages foreign investment. The presence of a royalty encourages the export of raw graphite instead of processed graphite because it is cheaper, a move that is not beneficial to local producers.

• Sri Lanka
• graphite
• exports
• China