The Bad News First:
There are a lot of unknowns atm. There might be a short term jump in sales depending how much ex-china anode produces and/or battery manufactures can get out of China before their suppliers need a permit to export. Whether China buys more fines from Balama or they have enough fines inventory to ride it out and/or fill any internal shortage with synthetic is unknown.
Once the short term window is closed, it will now depend on have rough China wants to push. Since it opened, Balama has been at the mercy of SPG producers. It's primary roll is a SPG feed stock supplier. Until Vidalia starts production, China manufactures 100% of SPG.
So who do we sell to at volume in the medium term if China plays hardball? There are no uses for raw flake graphite. It needs to be processed downstream into usable items. AAM, recarburisers, friction products, lubricants and coatings etc. Ex-China does do some of the processing down stream but bugger all in the scheme of things. The global fines market excluding SPG in which Balama produces 86% of is <100kt and China processes >60% into usable items from their own mines.
Graphex, Urbix, POSCO and Westwater are building AAM plants with some expected to be finished in 2024 but expect delays. These plants will need at least 12 months to ramp up like Vidalia and like Vidalia, the first expansions are small eg don't require much fine concentrate.
The non fine flake graphite market has hardly had any growth for 5 years. We sold slightly more in the June qtr than Balama usually does but the ex-China market is well catered for mainly from Madagascar. From Gallois SA in particular. They've been chomping at the bit waiting for the right market conditions to expand to 500ktpa from their 3 mines. I don't think the current situation is going to help them much.
So depending how rough China wants to play, don't expect much production from Balama in the next 12 months. However, I don't expect them to play too rough though. When China did the same thing with the 2 G's, they didn't issue any export permits in the first month but are slowly issuing them now.
The Good News:
This has been one hell of a wake-up call for the RoW. As some of us know, western Govt's, OEM's and battery manufactures have been sleep walking into this situation. Finance for new graphite mines and AAM plants has been near impossible to obtain.
Even if the Chinese don't play hardball, the damage has been done. The west are pouring trillions of dollars building up their EV industry from EV manufacture plants, battery manufacture plants and on-shoring their supply chains except for graphite. They know now if they don't start putting money and resources into on-shoring AAM production and anode plants, those trillions of dollars of investment are at risk.
The supply of flake graphite to the west isn't an issue. SYR and Gallios SA can more than cater for the wests needs for the next 3-4 years. The issue is building the downstream processing plants. As most of the regulars in here know, this takes years and billions of dollars of investment. The benefit of first mover status is finally paying off big time. The US will throw money at us. After the Chinese announcement, any political pushback has dissipated. The question now is how much and in what format. DOE, DOD. Loan or grant. Unlike the DOE, the DOD doesn't operate under tight govt legislation on who or how they give money to. I think they operate under an oversight committee from congress.
The good news for SYR is this has jumped started the SP out of the doldrums before the good news starts rolling out. Hopefully when the good news does starts rolling out, it can sustain the current momentum if Balama experiences any lull in sales .
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