Western graphite producers’ shares soar after Beijing announces export curbs

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Shares in non-Chinese graphite producers soared on Monday on expectations of stockpiling and a rush to secure alternative supplies after Beijing announced export restrictions on the material critical to electric car batteries.

Australia’s Syrah Resources, a Tesla supplier that operates the Balama graphite mine in Mozambique, jumped 40 per cent, adding to Friday’s 16 per cent gain. Other project developers followed, with London-listed Tirupati Graphite soaring 20 per cent and Renascor Resources up 36 per cent.

Shares in Brisbane-based Novonix, which is backed by US energy group Phillips 66 and has operations to produce synthetic graphite in the US and Canada, gained 22 per cent.

Beijing shocked the global battery supply chain on Friday with its latest set of curbs, requiring special licences for exporters of graphite, citing “national security” grounds.

Graphite can be produced either using mined material, known as “natural” graphite, or using hydrocarbon feedstocks, which is called “synthetic” graphite.

China is the world’s largest producer for both production methods, holding a 90 per cent share in global production of the lithium-ion battery’s anode, in which graphite is used.

Tirupati Graphite said in a statement on Monday that it expected consumers of graphite outside of China to try and secure supply of non-Chinese sources to mitigate the geopolitical risks.

Beijing’s export restrictions were “positive for Tirupati both in terms of the likely impact on prices, and on the long-term demand for our product”, said Shishir Poddar, executive chair of Tirupati Graphite.

Companies seeking to develop alternative sources in places such as Mozambique, Madagascar and Australia have struggled to raise financing from banks because graphite pricing is opaque and controlled by Beijing, making it hard to guarantee a return.

That issue has been further compounded by the huge amount of overcapacity in China of fossil fuel based synthetic graphite production that has formed in the past year, driving prices lower.

Producers have suffered from 30 per cent drop in graphite prices, according to Argus, with shares in most mining groups dropping more than half.

“The natural [graphite producers] are screaming with joy because of this China announcement,” said Ahmed Mehdi, an adviser specialising in lithium and graphite at Benchmark Mineral Intelligence, a battery metals business intelligence group.

Korean anode makers “will be in stockpiling mode” ahead of the restrictions being introduced in December, while the curbs serve as a “wake-up call for governments” to support the graphite supply, he added.

However, many analysts see Beijing’s move as political posturing. “While it’s not a ban and Chinese producers rely on export markets, Beijing is signalling its dominance over the global anode value chain,” said Medhi.

He questioned whether the picture would change dramatically for graphite project developers in the longer run, given that China would probably continue to export the glut of graphite in its own market. “For western investors, they will still have to confront the challenges of investing in graphite.”