Australian graphite stocks have experienced a significant surge after China's recent announcement of export controls on one of the crucial battery minerals essential for electric vehicles.
China, which serves as the world's leading graphite producer and exporter, further refines over 90 percent of the world's graphite into materials used in various applications, including electronics and defense systems such as weapons.
On Friday, China's commerce minister revealed plans to require export permits for certain graphite products, citing national security concerns. This development adds fuel to the escalating trade war, which encompasses a wide range of sectors from semiconductors to raw materials.
The export controls on graphite come at a time when the trade dispute between China and its US-allied counterparts is intensifying, particularly concerning technology and commodities. Earlier this year, China demonstrated its power by imposing restrictions on exporting gallium and germanium, two vital metals for the semiconductor, EV, and weapons industries.
The US and its allies have been actively seeking ways to reduce China's stranglehold on strategic materials, but alternatives to Chinese graphite sources remain limited. Graphite is among the 50 minerals listed by the US and one of the 26 commodities identified by Australia as critical to national security and economic growth.
In response to the news, shares in ASX-listed Syrah Resources, the largest graphite producer outside China, surged by an impressive 44 percent on Monday afternoon, reaching 76.5 cents. Syrah Resources, preferred by AustralianSuper as a battery minerals miner, produces graphite from its Balama mine in Mozambique and is on the verge of opening a battery anode factory in the US.
Walkabout Resources, currently developing a graphite mine in Tanzania, also experienced a surge, with its shares rising by 18 percent to 13 cents. Similarly, shares in Black Rock Mining, which is also developing a mine in Tanzania, climbed 25 percent to 12 cents.
Renascor Resources, a graphite hopeful with plans to construct a mine in South Australia and an accompanying battery anode material manufacturing plant in Port Adelaide, saw a remarkable jump of 31.8 percent, reaching 14 cents.
NOVONIX, a leading domestic supplier of battery-grade synthetic graphite focused on large scale and sustainable production to advance the North American battery supply chain, experienced a gain of nearly 13%.
China's decision to halt graphite exports starting from December 1 follows the US's expanded restrictions on Chinese companies' access to semiconductors, including a halt on sales of more advanced artificial intelligence chips produced by Nvidia.
However, amid the fierce competition in this trade war frontier, China has signaled its intention to remove punitive tariffs on Australian wine, which were initially imposed in 2020. This development comes ahead of Prime Minister Anthony Albanese's visit to Washington and paves the way for the first visit by an Australian prime minister to China in over seven years.
China's move to restrict graphite exports aligns with the European Union's consideration of imposing tariffs on Chinese-made EVs, alleging unfair advantages due to subsidies. Chinese EV manufacturers have been gaining an edge over their European and US counterparts in the race for market dominance, especially as they adopt cheaper lithium iron phosphate (LFP) batteries.
LFP batteries, which require significant amounts of graphite, are a form of lithium-ion battery with lower costs and a reduced carbon footprint. Despite their need for more frequent charging, UBS anticipates that automakers will embrace them due to their affordability.
Lachlan Shaw, the lead analyst in a recent research report, forecasts that natural graphite prices will reach $US850 per tonne by the end of the decade, driven by a sixfold increase in demand to 6.3 million tonnes by 2030. This represents a 50 percent recovery from the recent $US570 per tonne spot price.
The ongoing developments in the graphite market highlight the intricate and evolving dynamics of the global trade landscape, with potential implications for industries ranging from electric vehicles to national security.
