Northern Graphite, the critical link in North America’s graphite supply chain and operator of the continent's only producing flake graphite mine, Lac des Iles in Quebec, is facing a precarious future. The company announced last week that the mine could be placed under care and maintenance by the end of this year unless it secures C$10 million ($7.2 million) in funding for a planned expansion.

This potential shutdown would have significant implications for North American industries reliant on graphite, particularly as geopolitical tensions and supply chain vulnerabilities continue to rise. Graphite, while currently experiencing a price downturn due to slower electric vehicle (EV) sales and Chinese market dominance, remains a vital material for various industrial applications.

Hugues Jacquemin, Northern Graphite’s Chief Executive, emphasized the urgency of the situation following the release of the company’s 2024 results. Despite implementing stringent cost controls and achieving near-record sales volumes while expanding its market reach and establishing a battery materials division in Frankfurt, the company reported a C$7.5 million operating loss for the year. This financial strain is largely attributed to the dramatic 50% plunge in graphite prices over the past year, a consequence of sluggish EV sales and aggressive price undercutting by China, which controls over 70% of the global graphite market.

Jacquemin highlighted the paradox of strong industrial demand, particularly in North America which accounts for 85% of Northern Graphite’s sales, contrasting sharply with the depressed price environment. Demand for large and jumbo flake graphite, essential for industrial uses, has actually increased in scarcity due to reduced mining in China amidst an oversupply of anode material. Further supply constraints arise from disruptions at a major mine in Mozambique and challenges faced by new international projects.

Adding another layer of complexity, Beijing has tightened export controls on graphite to the United States, further pressuring Western producers already grappling with low prices and a lack of investment. The US has also imposed tariffs on both natural and synthetic graphite from China, with the potential for a dramatic increase if American producers succeed in their petition for anti-dumping tariffs as high as 920%. A decision from the US Department of Commerce and International Trade Commission on this matter is anticipated in the coming months.

The Lac des Iles mine has been operational for 35 years, primarily serving US industrial clients. In October, the company announced plans to increase its output from 10,000 to 15,000 tonnes annually starting this year and commenced the permitting process in the first quarter. However, this expansion is contingent on securing the necessary C$10 million funding. Last year, the mine produced 12,000 tonnes of graphite.