The Graphite MarketA second post in the series of things I don't...

The Graphite Market

A second post in the series of things I don't understand about Syrah and the graphite market ( after my previous post about the lack of off-take agreements from Balama).

What I don’t understand is the complete disconnect between the story being told by prospective graphite miners in their company presentations and what is happening in the real world. The story being promoted is that there is a massive supply shortage of natural graphite just around the corner, in 2013 Syrah predicted this would occur by 2016, and every year since it has been only two years away. The latest graph shows it is still two years away

Then there is the ubiquitous graphic showing that 97 graphite mines will be needed in the future. Every self respecting prospective miner is using this one to justify their existence.

However then there is the Roskill graph which is rarely shown, which includes synthetic graphite, that tells a completely different story.

So what I, or anyone else it seems, cannot predict is how this natural / synthetic story is going to play out. What does occur in the future in this regard will dictate the success or failure of every graphite miner in existence.

My thesis is that of the multitude of factors affecting the share price of every producing and prospective graphite miner in the world, there are only six factors that really matter at the moment and most of them are not in a positive phase.

To justify this assessment I present the following :-

Factor No 1 : Increase / Decrease in Natural Graphite - Fines - Prices

Down 6.9% in August and 15% since Syrah stopped production.

https://unauthorised investment advice/resources/ground-breakers-how-are-the-other-battery-metal-products-faring-as-chinas-economy-stutters/

Factor No 2 : Synthetic Graphite Prices versus Natural Graphite Prices

Synthetic Prices expected to remain low in near term future.

https://www.fastmarkets.com/insights/graphite-market-outlook-five-key-factors-to-watch

Factor No 3 : Synthetic Graphite Usage versus Natural Graphite

Synthetic Graphite Usage to increase.

https://www.fastmarkets.com/insights/lack-of-investment-diversification-challenges-for-european-graphite-market

Factor No 4 : Increase / Decrease in Natural Graphite supply - China

The seasonal mining shutdown in China is imminent. This usually leads to a seasonal uptick in prices (although this did not occur in 2022). Against this is how many new mines have commenced production and how many old ones have depleted their resources. Situation uncertain.

Factor No 5 : Spherical Graphite Prices

Reduced demand from Anode manufacturers for graphite in August.

https://unauthorised investment advice/resources/ground-breakers-how-are-the-other-battery-metal-products-faring-as-chinas-economy-stutters/

Spherical graphite prices at ten year low.

https://www.fastmarkets.com/insights/spherical-natural-graphite-prices-plunge-11-year-lows

Factor No 6 : Active anode material prices and supply.

The only slight bright note on the horizon that will hopefully lead to a more positive outlook for the other five factors. The graphite anode market (in September) is buoyant with strong buyer interest.

http://www.baiinfo.com.cn/en/NewsClass/14679

Further confirmation that these are the only factors that matter is an analysis of what has affected Syrah’s share price in the last three months, when you filter out the noise it is market fundamentals that prevail.

To my mind the next inflexion point is the Q3 Report on 17th October. There are many items of news on the agenda that could cause the share price to rise but all of those would justify a prior individual ASX announcement, although the fact that the vague announcement that campaign production had restarted at Balama was only made in response to an article in the Fin Review brings into question whether the market is being properly informed about anything. But on 17th October the company will be forced to update on everything, and I suspect it may not be pretty.

Disclaimer : I have been known to misunderstand basic facts and no one in their right mind should place any credence at all on anything I say. In fact no one does need to listen to me, major institutions and shorters have done their own research and so should any other serious investor.