As global battery demand prepares for a substantial increase, a recent report highlights graphite, not lithium, as a critical emerging constraint in the supply chain. While lithium often captures headlines as the primary raw material for electric vehicle (EV) batteries, the industry's heavy reliance on graphite for anodes could make it an equally significant bottleneck.
China's Dominance in Graphite Processing
According to a September 2026 DSP transcript, China possesses approximately 90% of the world's anode-material capacity and nearly all of its graphitisation capacity. This dominant position in a crucial stage of battery production raises concerns about potential supply disruptions.
Graphite is an essential component of the anode in lithium-ion batteries. The report identifies the anode as a potential "choke point" in the battery supply chain, noting that China's control extends beyond raw graphite production to the energy-intensive process of converting it into battery-grade material.
The Energy-Intensive Graphitisation Process
Graphitisation involves heating carbon material to extreme temperatures, often exceeding 2,800 degrees Celsius. This process is highly energy-intensive, making access to affordable electricity a vital factor in establishing and maintaining capacity. The DSP transcript suggests that China's strong position in anode processing is partly attributable to its availability of low-cost electricity.
Such a concentrated supply chain means that any disruptions to Chinese production, exports, or processing capabilities could have widespread implications for battery manufacturers globally.
Surging Demand Adds Pressure
The issue gains further significance as battery demand is projected to rise sharply in the coming years. DSP estimates indicate that global battery demand could increase from approximately 1,591 GWh in 2025 to between 3.5 and 4.4 TWh by fiscal year 2030, representing an annual growth rate of 17–23%.
EVs currently account for the largest share of this demand, but energy storage systems and AI data centers are expected to become increasingly important consumption sources. The report also notes a shift in battery chemistry, with LFP (lithium iron phosphate) batteries making up over 55% of global EV batteries in 2025, up from 24% in 2021, driven by their lower cost compared to nickel-based NMC batteries.
Despite these shifts, the expansion of overall battery volumes ensures that demand for anode materials and processing capacity will continue to grow.
A Strategic Supply Chain Challenge
The emerging graphite bottleneck underscores that battery supply chains must be assessed holistically, beyond just lithium availability. Cell manufacturing depends on numerous interconnected components, including cathode and anode materials, separators, and electrolytes. The DSP transcript highlights that the anode alone accounts for about 10–15% of battery-cell costs, with graphite being a commonly used material.
For nations aiming to build domestic battery manufacturing capabilities, securing access to anode materials and processing technology is as crucial as obtaining lithium and other raw materials. With battery demand expected to more than double by FY30, China's concentrated control over graphite processing presents a significant supply chain vulnerability for the entire global battery industry.