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Has graphite got its groove back?

China’s control over the graphite supply chain is nothing new.

As the world’s top graphite producer and exporter, China dominates every stage of the supply chain from feedstock material to active anode material production (AAM), accounting for more than 90% of the world’s graphite refining.

• China’s output was estimated at 850,000t of graphite in 2022 (or almost 65.5%) according to Statista, making the other top countries like Mozambique (117,416t) and Madagascar (110,000t) look tiny in terms of natural graphite production.

• The supply chain is so heavily concentrated that any move Beijing makes to weaponise its dominance has a trickle-down effect on graphite developers and explorers given there is currently nowhere else countries can get supply from.

• While the US has realised this with the Inflation Reduction Act (IRA) to onshore supply chains, the problem with graphite is its complexity when it comes to manufacturing onshore.

To feed the burgeoning electric vehicle sector, graphite flakes undergo a micronising process before being further processed into spherical graphite for use in lithium-ion batteries.

Flake sizes of less than 150 micron (100 mesh) are preferred as larger flakes require a greater size reduction which incurs a higher cost.

Experts believe China’s move last month to introduce graphite export permits from December could potentially disrupt supply chains, raise costs, and affect production.

Others believe it presents an opportunity for countries outside of China to diversify their sourcing and reduce dependence on the Middle Kingdom.

But for so long now, graphite has been the forgotten commodity in the battery revolution.

With no significant supply disruptions for a decade, Benchmark Mineral Intelligence CEO Simon Moores says graphite has not had a price spike akin to lithium, cobalt and nickel and therefore slipped under the radar of battery makers, OEMS, and Western governments.

Has the turning point for the material finally come and if so, what makes this time different?

Keep an eye on ASX:VRC, ASX:MLS & ASX:SYR!

Across markets

Australian shares are set to open higher on Monday, ahead of a flurry of economic indicators that are set to test the Reserve Bank’s first batch of forecasts under Michele Bullock’s governorship.

ASX futures are tilting 24 points, or 0.3 per cent, higher, following Wall Street’s lead after a surprise rally across indexes in the United States on Friday, led by some of the largest technology groups.

The stronger open arrives after a tepid five days trading on the ASX last week. The benchmark ended Friday just 1.7 points lower than a week earlier. That was despite the RBA enacting its first cash rate rise in five months and revising up its inflation outlook in its latest Statement of Monetary Policy.

The inclusion of the word “whether” in the RBA’s statement following the rate rise had market commentators noting a less hawkish tone by the central bank. On Monday, a speech by the RBA’s acting assistant governor, Marion Kohler, in Sydney will be watched closely for any further signs that the central bank’s tightening basis is toning down.

National Australia Bank senior economist Taylor Nugent expects the detail of the speech to hew close to the central bank’s statement, which he points out was at odds with the less hawkish tone.

“The RBA’s forecasts, which show core inflation barely within the 2-3 per cent band in over two years’ time, is in disconnect with the weak tightening bias,” he said.

Source: AFR