Why Shaw thinks graphite stocks are a buy as China’s export ban...

Why Shaw thinks graphite stocks are a buy as China’s export ban spooks EV market

Beaten graphite stocks see glimmer of hope as Chinese export restrictions raise hope for higher pricesShaw and Partners analyst Peter Kormendy says prices will have to rise to incentivise new minesUnder business as usual, China will own more than 90% of the anode market until at least 2035Graphite stocks have been down on the canvas throughout 2023, threatening to become the never was of the first wave EV investment boom.While lithium miners have seen astonishing runs as prices hit record highs in 2022 and since depressed nickel, cobalt and copper have all seen their day in the sun, graphite has struggled to fire.It’s confusing given graphite — used in the anode in EV and other lithium ion batteries — makes up more of the metal content of a battery than any other commodity.A complicated material, natural graphite is not only sold in a variety of different products and grades for different end markets, it also faces competition from synthetic sources of the material made from carbonaceous products like petroleum and coal.The type of graphite commonly quoted as a bellwether for the graphite heading into batteries is 94-95% carbon -100 mesh flake graphite. That rose steadily in 2022 but has fallen sharply in 2023, fetching US$563/t at the start of October according to Benchmark Mineral Intelligence, down around 31% this year.Benchmark’s graphite index is down 29.3% YTD, and that’s without experiencing the extraordinary highs other battery metals saw last year.To top it off, the supply chain is so heavily concentrated in China that the world’s biggest producer has extraordinary control over the key EV metal, and rising supply of natural and synthetic graphite for anode materials has been a big driver of price suppression this year.But, lo and behold, those same fears had graphite miners, developers and explorers surging last week after reports emerged China planned to place export controls on graphite products used in EV batteries.That has the potential to see anode material and flake graphite prices catch a break as non-Chinese battery producers stockpile material ahead of a December 1 deadline for restrictions to begin, BMI says. How did ASX stocks respond?The ASX’s best known graphite stock Syrah Resources (ASX:SYR), which has been operating its Balama natural graphite mine in Mozambique on a campaign basis due to low prices, is down 65% YTD.But the $473 million company has seen its shares surge 52% since October 19.Black Rock Mining (ASX:BKT) is up 22%, Walkabout Resources (ASX:WKT) 9%, Talga Group (ASX:TLG) 12%, Australian focused Renascor (ASX:RNU) up 45%, Lithium Energy (ASX:LEL) up 10%, and Evion Group (ASX:EVG) and International Graphite (ASX:IG6) unchanged.According to BMI, China is responsible for close to 70% of global natural and synthetic graphite supply and over 90% of the anode material used in batteries. Even with moves to expand output in the West, it could keep close to its current market share until 2035.That’s with a market growing roughly 10x over.