Graphite, not lithium, may be the battery industry's biggest choke point: Report

As the global battery industry prepares for a sharp increase in demand, graphite is emerging as a critical supply-chain constraint. While lithium is often viewed as the key raw material for electric vehicle batteries, the battery industry's growing dependence on graphite for anodes could make the material an equally important bottleneck.

According to the September 2026 DSP transcript, China holds roughly 90% of global anode-material capacity and close to all of the world's graphitisation capacity, giving it a dominant position in a critical stage of battery production.

Why graphite matters

Graphite is used in the anode of lithium-ion batteries. The transcript identifies the anode as a potential "choke point" in the battery supply chain, with China’s dominance extending beyond simply producing graphite to the energy-intensive process of converting material into battery-grade graphite.

Graphitisation involves heating carbon material to temperatures above 2,800 degrees Celsius. The process is highly energy intensive, making access to relatively inexpensive electricity an important factor in building and maintaining capacity. The transcript links China's strong position in anode processing partly to its availability of low-cost electricity.

The concentration means that disruptions to Chinese production, exports or processing capacity could have implications for battery manufacturers elsewhere.

Battery supply-chain comparison

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EV growth adds to the pressure

The issue becomes more significant as battery demand is expected to rise substantially over the coming years. DSP estimates that global battery demand could increase from around 1,591 GWh in 2025 to 3.5–4.4 TWh by FY30, implying a 17–23% annual growth rate. EVs account for the largest share of current demand, while energy storage and AI data centres are expected to become increasingly important demand sources.

The chemistry mix is also changing. LFP batteries accounted for more than 55% of global EV batteries in 2025, compared with 24% in 2021. Their lower cost has helped drive the shift away from nickel-based NMC batteries.

This does not remove the importance of the anode supply chain. As overall battery volumes expand, demand for the materials and processing capacity required to manufacture cells also increases.

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A strategic supply-chain challenge

The graphite bottleneck also highlights why battery supply chains cannot be assessed only through lithium availability. Cell manufacturing depends on several interconnected components, from cathode and anode materials to separators and electrolytes.

The DSP transcript notes that the anode accounts for around 10–15% of battery-cell costs, with graphite among the commonly used materials.

For countries seeking to build domestic battery manufacturing, therefore, access to anode materials and processing technology is as important as securing lithium and other raw materials.

With battery demand projected to more than double by FY30, China's concentration in graphite processing makes the material a key supply-chain vulnerability for the global battery industry.

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