EV sales are increasing, Renescor has plenty of graphite to put...

EV sales are increasing, Renescor has plenty of graphite to put into the needed batteries, there must be a guaranteed market just waiting for the mine to be developed right? Well there are a few steps along the way between the mine and your new EV and they are all currently and into the distant future controlled by China.

This graphic explains the current situation and why there is actually no one wanting to buy all that graphite.

At the moment there is only one graphite mining company ex China producing primarily for the battery anode market, Syrah Resources in Mozambique. There are other graphite miners but they are selling primarily into the refractory / Industrial market which remains relatively buoyant. Syrah has the capacity to produce 350ktpa but in the last year has only produced 64kt. Their main customers are in China which has more than enough natural small flake graphite of their own and an overcapacity of synthetic graphite which has swamped the battery anode industry. Synthetic currently accounts for more than 80% of graphite used in EV batteries. There is currently very limited ex China market for their product.

Battery Anode Materials - The Bottleneck in the Supply Chain

Posco Future Industries in Sejong, South Korea is the only battery anode material (BAM) factory outside China and they get all their precursor material (USPG) from China because there is noone else to buy it from. Renescor has a MOU to supply that market from their upcoming Bolivar plant in Adelaide and Posco wants to buy from them but they don’t want to pay any more than they currently pay which is uneconomical for Renescor so that plant is not going to be built anytime soon.

Posco is building a new 80 Gwh BAM factory in Pohang, South Korea (expected to open in 2025) which will produce USPG as well as CSPG so will then be in a position to buy graphite flake from miners. They already have MOUs with Syrah Resources, Nextsource Resources and Black Rock Mining (which will have priority as Posco is partly financing their mine) so DC will have to elbow his way into the queue for that market.

Mitsubishi Chemicals is the only other ex China company producing CSPG but they produce theirs in their subsidiary in Qingdao in China.

There other companies trying to get into the BAM industry :-

Syrah Resources has a new 11.25 Gwh plant in Vidalia, USA and is trying to get financing / government grants / loans to increase that to 45 Gwh

BTR New Materials Group in Morowali, Indonesia is expected to be the next BAM plant at 80 Gwh capacity to open sometime in 2024. They will produce both natural and synthetic anode, it is unknown how much of each, but indications are that it will be primarily synthetic. Syrah Resources have already supplied them some natural graphite.

All other entrants into the BAM market are still trying to get financed. As well as Syrah Resources there are Nextsource Materials Inc in Mauritius, Talga Group Ltd in Sweden, Nouveau Monde Graphite in Canada, Gotion Technologies in USA, Westwater Resources in USA and Grafintec Oy in Finland. None of these companies (other than Gotion which is a Chinese company) can get financing because they cannot compete pricewise with China. They are all saying there must be subsidies, special pricing and tariffs on Chinese companies if they are going to succeed.

The next step in the chain is the battery manufacturers which are trying to set up in USA and Europe. They want to diversify their supply chains away from China but don’t want to pay any more to do so. They are against tariffs to aid anode producers because they say it will take up to five years for any of them to be in a position to supply (because that's how long it takes to build and get product qualified) but there should be tariffs on Chinese battery suppliers otherwise they will be unable to compete.

The next tier is the vehicle manufacturers that are against tariffs for anode producers and battery manufacturers because that will make their already more expensive cars even more so. They would like to see Chinese cars banned altogether as the only way they can thrive.

The final step in the chain is the customer wanting to buy an EV. They don‘t want vehicles banned. To them Chinese vehicles are superior in quality and lower in price so they want to continue buying them. All the way down the supply chain governments (both Chinese, American, European and now Australian) are throwing fantastic amounts of money into this giant geopolitical battle and I have to say at the moment the Chinese are leap years ahead.

So thats the position that all graphite miners are currently facing. There are at the present time 12 worldwide mainly in Africa (but Australian owned) and Canada, that are at the DFS stage trying to get financing. Renescor has hit the jackpot, they got what no other graphite mining company has been able to do, get government loan backing. But for that loan to become unconditional one prerequisite is that they must be able to demonstrate they can sell their product and that is the next challenge.

Disclaimer

I am no graphite expert, I don’t pretend to know anything near as much about what is happening in the industry as Dave Christensen and the board of Renescor. I just troll the internet for information. It is said that more than 60% of everything written by or about graphite mining companies and industry is exaggerated or untrue so there is no reason to believe anything I contribute doesn’t fall into that category.