Australian graphite stocks are up strongly after China announced export restrictions

Australian graphite stocks are up strongly as China announced it would impose export controls on two types of graphite crucial to battery production.

Australian graphite stocks are up strongly after China announced imminent export controls for two types of the mineral, which is crucial for battery manufacturing.

China is dominant across the graphite mining and downstream processing sectors, and is responsible for about 67 per cent of global production, according to Benchmark Mineral Intelligence.

China’s Ministry of Commerce has announced export controls for natural and synthetic graphite and their products, which will be implemented from December 1.

Graphite is used as the anode material in lithium-ion battery manufacturing and is therefore used in virtually all electric vehicle batteries.

The Chinese move follows the US imposing new limits on the types of semiconductors which can be sold to Chinese firms, and the EU announcing last month it would investigate whether to impose tariffs on Chinese-made EVs, which the European Commission says are benefiting from government subsidies.

Shares in Syrah Resources, which produces graphite from its Balama mine in Mozambique and is nearing completion of an active anode material production facility in the US, were up 8.5 per cent to 57.5c.

Renascor Resources, which is developing a graphite mine on the Eyre Peninsula in South Australia and a battery anode material manufacturing operation in the Adelaide metropolitan area, saw its stocks jump 10.9 per cent 12.2c.

Black Rock Mining shares were 19.8 per cent higher, while Evolution Energy Minerals shares were 17.9 per cent higher at 16.5c.

Australian graphite stocks are up strongly as China announced it would impose export controls on two types of graphite crucial to battery production. Picture: Monique Harmer/NCA NewsWire

Shaw and Partners said in a note to clients it expected the announcement by the Chinese government to be “very positive for near-term graphite prices and reiterate our buy recommendations across the sector”.

“China dominates graphite mining, processing and anode production and is set to produce 67 per cent of global natural graphite this year according to Benchmark Mineral Intelligence,’’ it said.

“China also refines more than 90 per cent of global battery anode material that is used in virtually all electric vehicle battery anodes.

“Given the pre-existing forecasts for graphite supply shortages coming, and that there are few shovel-ready projects poised to meet the forecast demand anywhere in the world, graphite prices must move up to incentivise new production.

“In the medium-term, the policy will accelerate the still nascent build-out of battery anode supply chains in the West.’’

Shaw said there was “virtually no material produced internally in the US today’’.

“The US has already designated graphite as a strategic critical mineral, and the combination of the strategic importance of graphite and the US Government’s commitment to securing internal sources of supply of critical minerals presents Evolution with an exceptional opportunity for vertical integration,’’ Shaw said.

Evolution owns 84 per cent of the Chilalo graphite project in Tanzania, which it has completed a definitive feasibility study on, indicating a build cost of $US120m.

It also has agreements with battery anode materials manufacturer BTR to collaborate on downstream processing initially in North America, with BTR also agreeing to an offtake agreement for graphite fines for three years.

Shaw said graphite prices tripled between 2007 and 2011, generating a surge in new exploration, however the bubble burst in 2012 as synthetic graphite supplies came online.

“The start-up of Balama at the start of 2018 saw further price declines as Syrah Resources sought to find the market clearing price,” Shaw said.

“Prices remained steady notwithstanding the market being in surplus throughout Covid, however the resurgence in EV demand saw prices increase throughout 2022 on increasing demand and lack of new supply.

“Fines prices have fallen some 30 per cent during 2023 on a lower rate of EV demand and increased synthetic output in China.”

Shaw says graphite consumption is expected to increase, largely due to the growing EV market.

“The battery end-use market for graphite has grown by 250 per cent globally since 2018,” it said.

“In the US, four lithium-ion battery manufacturing plants are currently in operation, with an additional 21 in development.

“At full capacity, these plants are expected to require 1.2mt per year of spherical purified graphite, with perhaps half coming from synthetic.

Shaw has a $1.30 price target on Syrah Resources, 46c for Black Rock and 72c for Evolution Energy Minerals.

Originally published as Australian graphite stocks are up strongly after China announced export restrictions