"Three to Six Months”: Epsilon’s Handa Warns the Graphite Crisis Is Closer Than We Think

The global scramble for critical minerals is intensifying, with a stark warning from industry veteran Vikram Handa, Managing Director of Epsilon Group, that the geopolitical leverage China has historically wielded over rare earths is now rapidly extending to graphite – a crucial component in electric vehicle (EV) batteries.

This burgeoning control over graphite, which constitutes 25% of a battery cell, poses a significant threat, potentially bringing other countries'cell and EV industries including that of India to a halt and forcing them back to Chinese-sourced products.

"The same thing is happening for graphite for the last one year" Handa noted. "So, you can almost see this conversation around rare earths playing out in graphite I would say in the next three to six months".

The underlying challenge, according to Handa, is not merely the availability of raw rare earths or critical minerals, but rather the processing industry.

China has adeptly developed and supplied these processed materials cheaply to the world, establishing a near-monopoly on processing capacity and technology. This has left other nations heavily dependent, as building new processing facilities and qualifying with complex automotive supply chains is a time-consuming endeavor, often taking years.

Strategic Pathways: Bilateral Agreements and Global Footprint
To counter this dependency, Epsilon has actively proposed that India be granted favored nation status in sourcing processed critical minerals from the US. This status, they argue, would facilitate the flow of both technology and capital into India, enabling the country to build its own processing capacity.

Initially, India could supply the U.S. market, and as its domestic market matures, the local supply chain would become competitive and self-sufficient.
However, this proposal has faced delays due to shifts in U.S. government policy since October. Handa further suggests that traditional Production Linked Incentive (PLI) schemes alone, such as the Rs 18,000 crore ACC PLI, have not consistently been effective in developing industries, emphasizing that customer contracts and access to funding are more crucial.

The U.S. market, with its annual consumption of 500,000 tons of graphite, represents a significant potential customer for Indian producers. "So the market already exists in the US". "In India today, the demand must be less than 4,000 tons a month a year" Handa stated.

Epsilon itself is actively expanding its global footprint to address these supply chain vulnerabilities. In India, the company has operated a 2,000-ton customer qualification plant for graphite anodes for over a year and a half. Plans are underway to commence construction for a larger plant early next year, aiming for a capacity of 30,000 tons per annum (TPA) by mid-to-late 2027, scaling up to 100,000 TPA by 2030 in India.

In the United States, Epsilon announced a $650 million investment for a 60,000 TPA anode material facility in North Carolina, projected to produce 30,000 TPA by 2027 and 60,000 TPA by 2030. 

Europe is also on Epsilon's radar, with permitting for their Finland project, which will have a 30k TPA graphite anode plant, having begun in 2022 and expected to take another two years to secure environmental permits, with construction slated for 2029.

The company has also strategically acquired a cathode material technology center in Moosburg, Germany, which focuses on LFP (Lithium Iron Phosphate) and LMFP (Lithium Manganese Iron Phosphate) grade R&D, commercial production, and advanced cell testing, with plans for a 10k TPA LFP & LMFP cathode material plant by 2027.

While rare earth processing is considered "interesting," Epsilon's immediate focus remains firmly on the anode and cathode businesses, acknowledging the significant time and capital required to develop commercial-scale rare earth processing technology.

Domestic Hurdles and Policy Imperatives
A critical domestic challenge in India is the hesitancy of Indian cell manufacturers to commit to local suppliers due to cost concerns, often opting for cheaper Chinese imports, even if they are sold below cost.

Handa contends that this reflects a "very short-term view" by Indian customers, which could lead to severe supply chain vulnerabilities and inflated prices once China solidifies its market dominance. He emphasizes the necessity of having multiple, stable, long-term suppliers to mitigate over-reliance on a single source.

For India to truly forge a path toward self-reliance in the critical mineral sector, Vikram Handa outlines a series of urgent, short-term policy shifts. He expects that the government must first consider gradually restricting the import of Chinese materials.

This strategic move, he believes, would send a clear and unequivocal signal to Indian customers, prompting them to integrate domestic companies into their vital supply chains and foster local growth.

Handa firmly reiterates that traditional Production Linked Incentive (PLI) schemes, while well-intentioned, are insufficient on their own to drive the necessary investment decisions for the entire EV supply chain. For companies like Epsilon, investment hinges on securing concrete customer contracts and access to reliable funding, rather than solely relying on PLI incentives.

He highlights the need for tailored support, noting that the battery material industry is complex, with varying capital expenditure requirements and needs for subsidies (e.g., water, power) across different segments.

Looking ahead, Handa quantifies the immense investment required for India to achieve its ambitious goal of establishing 100 gigawatt-hours (GWh) of battery capacity by 2030. This undertaking, he estimates, would necessitate approximately Rs 50,000 crores in investment over the next five years.

This substantial capital would be directed towards securing and developing critical battery materials, including graphite, cathode materials, electrolytes, separators, and foils, all vital components for a self-sufficient battery ecosystem.

Circular Economy: Battery Recycling in India
Adding another layer to India's material independence, Epsilon is actively involved in battery recycling through its facility in Bangalore, Lico Materials, operational for the past two years.

Handa notes a significant influx of end-of-life batteries from two-wheelers, three-wheelers, and buses, often due to B-grade cells from China failing sooner than expected, leading to premature recycling. "So, what is supposed to last seven years, lasted just about three years," explained Handa, while reflecting on the demand for recycling.

Additionally, substantial production scrap is anticipated from new cell manufacturing facilities in India (e.g., Ola, Exide, Amara Raja) as they stabilize their production lines. 

Epsilon's overarching goal is to make their anode and cathode businesses circular by recovering graphite and lithium from recycled materials to blend with virgin materials, thereby increasing domestic value addition (DVA) and reducing the carbon footprint.

Way forward
The path to self-reliance in critical minerals and battery materials for India is complex, requiring a multi-pronged approach that combines strategic international partnerships, robust domestic policy, and significant capital investment, all underpinned by a clear sense of urgency to secure a vital supply chain for the future.