China\u2019s control over the graphite supply chain is nothing new.<\/p>\n
As the world\u2019s top graphite producer and exporter, China dominates every stage of the supply chain from feedstock material to active anode material production (AAM), accounting for more than 90% of the world\u2019s graphite refining.<\/p>\n
Distribution of graphite production worldwide in 2022, by country. Pic via Statista<\/p>\n
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China\u2019s output was estimated at 850,000t of graphite in 2022 (or almost 65.5%) according to Statista, making the other top countries like Mozambique (117,416t) and Madagascar (110,000t) look tiny in terms of natural graphite production.<\/p>\n
The supply chain is so heavily concentrated that any move Beijing makes to weaponise its dominance has a trickle-down effect on graphite developers and explorers given there is currently nowhere else countries can get supply from.<\/p>\n
While the US has realised this with the Inflation Reduction Act (IRA) to onshore supply chains, the problem with graphite is its complexity when it comes to manufacturing onshore.<\/p>\n
To feed the burgeoning electric vehicle sector, graphite flakes undergo a micronising process before being further processed into spherical graphite for use in lithium-ion batteries.<\/p>\n
Flake sizes of less than 150 micron (100 mesh) are preferred as larger flakes require a greater size reduction which incurs a higher cost.<\/p>\n
Experts believe China\u2019s move last month to introduce graphite export permits from December could potentially disrupt supply chains, raise costs, and affect production.<\/p>\n
Others believe it presents an opportunity for countries outside of China to diversify their sourcing and reduce dependence on the Middle Kingdom.<\/p>\n
But for so long now, graphite has been the forgotten commodity in the battery revolution.<\/p>\n
With no significant supply disruptions for a decade,\u00a0Benchmark Mineral Intelligence CEO Simon Moores says<\/a> graphite has not had a price spike akin to lithium, cobalt and nickel and therefore slipped under the radar of battery makers, OEMS, and Western governments.<\/p>\n Has the turning point for the material finally come and if so, what makes this time different?<\/p>\n Stockhead <\/em>sat down with four ASX graphite stocks to get their read on the situation.<\/p>\n WordPress Tables Plugin<\/a><\/p>\n \u00a0<\/p>\n EcoGraf (ASX:EGR)<\/a> is the only graphite stock looking to take advantage of oncoming graphite demand with three standalone businesses \u2013 mining, processing, and recycling.<\/p>\n Using its HFfree purification technology, EGR plans to upgrade flake graphite to produce 99.95% battery anode material at its Product Qualification Facility (PQF) in Western Australia, which is expected to be commissioned in the first quarter of \u201924.<\/p>\n The facility, jointly funded through the Commonwealth Government\u2019s $48.8m critical minerals development program, will be the first of its kind outside China and will source high-purity graphite feedstock from the long-life Epanko graphite project in Tanzania. The company\u2019s been around well before the last graphite boom went bust in 2017.<\/p>\n EGR managing director Andrew Spinks believes it\u2019s been a long time coming but the graphite market is finally at a turning point.<\/p>\n \u201cThere\u2019s been a level of comfort that comes with China having a huge endowment of graphite readily available,\u201d he says in an interview with Stockhead<\/em>.<\/p>\n \u201cThe issue for the rest of the world is it\u2019s at low sustainable production levels and the EV manufacturers are now demanding high ESG requirements, which heightens the importance of new supply chains outside of China.<\/p>\n \u201cUp until now, the world hasn\u2019t given much attention to the anode supply chain but we\u2019re going to see greater support now for alternate material,\u201d he says.<\/p>\n With the effects of the IRA and EU Green Deal coming into play from 2025\/2026, Spinks says China\u2019s graphite curbs \u2013 similar to those imposed on gallium and germanium three months ago \u2013 will trigger interest from the EV and battery supply chain.<\/p>\n \u201cThis is a long-term gain, given the time it takes to fully transition from combustion motors to electric vehicles,\u201d he says.<\/p>\n \u201cAnd any company that is advanced to a development stage or is in production will be directly impacted by this move.\u201d<\/p>\n \u00a0<\/p>\n Backed by Japan\u2019s largest chemical corporation Mitsubishi Chemical, $419m market cap company Renascor Resources (ASX:RNU)<\/a> is in the advanced stages of development at its Siviour project on South Australia\u2019s Eyre Peninsula.<\/p>\n The company plans to integrate Siviour with a downstream manufacturing facility that will produce purified spherical graphite (PSG) that is used in the anodes of lithium-ion batteries.<\/p>\n While Sivour already holds the largest graphite ore reserve outside of Africa, recent resource expansion drilling increased resources some 25% to 123.6Mt at 6.9% TGC, or 8.5Mt of contained graphite, with 61% of that in the higher confidence Measured and Indicated categories.<\/p>\n RNU managing director David Christensen says most of the initial commentary on China\u2019s graphite restriction centred on the possibility that this was a retaliatory action by China as part of larger trade issues, but this is likely partly true.<\/p>\n \u201cThe decision to focus on graphite is likely reflective of China having a larger demand for graphite than supply,\u201d he says in an interview with Stockhead<\/em>.<\/p>\n \u201cIts dominance in the mid-stream processing of graphite has driven graphite prices down as Chinese companies jockey for market share at the expense of margin.<\/p>\n \u201cBy restricting graphite exports, Chinese companies will benefit from these temporary low prices,\u201d he says.<\/p>\n \u201cIn the longer term as Chinese EV demand rebounds and more battery minerals like graphite are needed, China will need to look outside of its borders for raw materials.<\/p>\n \u201cMuch like the end of 2022, this should lead to increased graphite prices and make it easier for new projects outside of China to get started.\u201d<\/p>\n \u00a0<\/p>\n Kingsland Minerals (ASX:KNG)<\/a> is prepping its Leliyn graphite project in the Northern Territory for an initial resource estimate in the first quarter of \u201924 from an established Exploration Target of 200-250Mt grading 8% to 11% total graphitic carbon (TGC).<\/p>\n The resource sits along 20km of graphitic schist, which co-hosts significant levels of gallium used in semiconductors and electronic equipment by major supplier, China.<\/p>\n KNG managing director Richard Maddocks says the initial short-term impact of the restrictions so far has been increased interest in graphite stocks, reflected in the share price surge of many ASX stocks.<\/p>\n \u201cWe\u2019ve had a lot of interest with people ringing up,\u201d he says.<\/p>\n \u201cThe situation has shone a light on how much China has a monopoly on the supply chain and it could help to promote funding into new graphite projects,\u201d he says.<\/p>\n \u201cSince the announcement, we\u2019ve already seen the Federal Government come out with their Critical Minerals Fund \u2013 an extra $2 billion \u2013 which isn\u2019t a direct result of the export controls but goes to show Australia is getting serious about supporting these projects.\u201d<\/p>\n \u00a0<\/p>\n iTech Minerals (ASX:ITM)<\/a> is another near-term graphite play with an established battery-grade resource, permitted mining lease and resource expansion drilling program in full swing at its Campoona project on South Australia\u2019s Eyre Peninsula.<\/p>\n ITM managing director Michael Schwarz says near-term producers of battery quality graphite products are likely to see a significant increase in offtake agreement enquiries.<\/p>\n \u201cThese agreements are essential to establishing the infrastructure to move up the supply chain from graphite concentrate to purified spherical graphite production,\u201d he says.<\/p>\n \u201cThe Chinese Government has strongly signalled that the recent growth in supply from synthetic graphite producers in China is likely to be consumed within Chinese markets, leaving battery producers outside of China at risk of supply deficits.<\/p>\n \u201cASX companies with proven battery grade graphite projects with plans to build vertically integrated supply chains to supply battery anode material are likely to become a hot commodity for the ever expanding list of battery manufacturers outside of China.\u201d<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n\n \ufeff<\/span><\/span><\/span> The post Has graphite got its groove back? 4 ASX stocks explain the impact of China\u2019s export restrictions<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"<\/h2>\n
Graphite stocks on the ASX<\/h2>\n
Companies in advanced stages of development to benefit <\/strong><\/h2>\n
Longer term picture: China to look outside borders for raw materials <\/strong><\/h2>\n
An extra boost to the critical minerals sector <\/strong><\/h2>\n
Graphite offtake agreements to come <\/strong><\/h2>\n
Graphite stocks share prices today:<\/h2>\n
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\nAt Stockhead<\/em> we tell it like it is. While Renascor, Kingsland Minerals, and iTech Minerals are Stockhead<\/em> advertisers, they did not sponsor this article.
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