The Race For Graphite Is On For Tesla

Magnis MNS +3.70% Energy Technology and Tesla TSLA +3.10% have reached an agreement to obtain graphite supplies.

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The acquisition demonstrates the steps taken by the automaker to lock up important battery supply. The material is quickly becoming essential in the shift toward the adoption of electric vehicles.

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Lithium-ion batteries, the most popular form of battery for electric vehicles like Tesla's, use graphite as a component (ticker: TSLA). The substance, which is now mostly supplied by China, is in danger of running out. 

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The Biden administration announced last year that it had given 20 businesses a total of $2.8 billion to construct and expand facilities on a commercial scale to create battery materials, including graphite, in 12 states. Magnis (MNS.Australia), a company situated in Australia, was not one of the grantees, but Syrah Resources (SYR.Australia), a supplier of graphite to Tesla, was.

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Magnis announced on Tuesday that it would provide Tesla with battery components from a U.S. factory that has not yet been constructed. Beginning in February 2025, Magnis will provide a minimum of 17,500 metric tons annually, with a maximum of 35,000 tons.

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In Tanzania, Magnis produces graphite concentrate and claims that there is no requirement for chemical or thermal purification before using it to make battery components. It is possible to make synthetic graphite, however the procedure requires more energy.

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Tuesday's premarket trade saw a decline of almost 1% in Tesla stock. In Sydney, shares of Magnis increased by 3.7%.

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Batteries materials have emerged as a popular investment area, but stock movements can be unpredictable as new purchase agreements and technological advancements alter expectations for future commodity pricing. After Contemporary Amperex Technology 300750 -1.30% (300750.China), the world's largest manufacturer of electric vehicle batteries, unveiled a new pricing plan last week, lithium LTUM +1.23% stock prices suffered.