The graphite industry is ‘on the road to recovery’

The graphite market is waking up — buoyed by record crude steel production, robust battery anode production and sales, and emerging markets like e-bikes and 5G infrastructure.

Improved post-COVID demand is a breath of fresh air for flake graphite producers and explorers who have been battered by years of weak investor sentiment.

Graphite demand is primarily driven by the steel market, but rapid growth in electric vehicle production is expected to drive demand over the medium and long term.

By 2050, The World Bank Group estimates that about 4.5 million tonnes of graphite will be needed each year – that’s a 500 per cent increase on 2018 levels.

Industry contacts told Benchmark Mineral Intelligence that enquiries had been improving for 2021 orders as the market entered contract negotiation season.

“Supply chain players continue to report increased enquiries from automakers and anode producers, with orders now showing a marked increase on levels earlier in the year; particularly in China where the EV supply chain’s recovery is improving most rapidly,” Benchmark says.

There’s added support from emerging battery applications such as 5G infrastructure and e-bikes. E-bikes just recorded its fourth consecutive month of ~50 per cent growth, Benchmark says.

“The increase in downstream demand has converted to robust orders for anode material, with leading anode producers BTR, XFH, and Shanshan stating that they had received record orders from cell manufacturers during the supply chain recovery,” Benchmark says.

“As such, anode participants have pushed forward plans to expand capacity.”

One of the world’s biggest car markets, Europe, is also hellbent on fast-tracking the nascent electric vehicle ramp up as part of its economic recovery from the pandemic.

This includes building its own supply chains –which is great news for Europe-focused graphite anode plays like Talga Resources (ASX:TLG) and Mineral Commodities (ASX:MRC).

Graphite players are stirring

Here’s how a basket of ASX-listed graphite stocks has performed over the past year>>

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop:

CODE	COMPANY	1 MONTH RETURN %	6 MONTH RETURN %	1 YEAR RETURN %	SHARE PRICE	MARKET CAP
AXE	Archer Materials	12	206	242	0.505	$110.1M
EGR	Ecograf	150	200	163	0.21	$72.8M
TLG	Talga Resources	31	176	76	0.8	$200.7M
MRC	Mineral Commodities	21	52	52	0.32	$141.1M
BAT	Battery Minerals	-20	100	33	0.012	$17.1M
TON	Triton Minerals	0	121	33	0.053	$60.1M
BEM	Blackearth Minerals	50	58	14	0.057	$6.0M
MNS	Magnis Energy Technologies	-5	257	11	0.2	$141.4M
VRC	Volt Resources	-31	120	1	0.011	$22.2M
SYR	Syrah Resources	21	111	-5	0.465	$190.8M
BKT	Black Rock Mining	-11	100	-7	0.055	$37.4M
RNU	Renascor Resources	-8	120	-21	0.011	$18.1M
WKT	Walkabout Resources	0	60	-29	0.2	$66.3M
BSM	Bass Metals	-17	25	-69	0.0025	$11.8M

Graphite explorers have reported a number of crucial project developments over the past few months, another sign that the industry is “on the road to recovery following several months of suppressed demand”, Roskill says.

In August, European battery anode and graphene company Talga Resources raised $10m in a placement which received applications “well in excess of the amount sought to be raised”.

This reflects significant investor interest as development of its integrated graphite anode facility in Sweden progresses, Talga says.

In September, South Aussie explorer Renascor Resources (ASX:RNU) inked a non-binding offtake deal with one of China’s biggest battery material suppliers.

This memorandum of understanding (MOU) — a non-binding agreement that generally comes before a legally binding one — covers up to 10,000 tonnes a year of Purified Spherical Graphite (PSG) from the Siviour project over 10 years.

“Notwithstanding uncertainties created by COVID-19, the demand for electric vehicle batteries continues to underpin growing demand for PSG, with the market opportunity particularly strong in China,” Renascor managing director David Christensen says.

“We are seeing increasing interest from anode makers for our Siviour PSG, and we expect this to assist in securing additional offtake commitments in line with our financing and development strategy.”

Talga Resources (ASX:TLG) and Renascor Resources (ASX:RNU) share price charts

Meanwhile, EcoGraf (ASX:EGR) signed a $US98m ($137.2m) agreement with the WA government to build the first spherical graphite processing facility outside China, with construction set to begin in mid-2021.

Ecograf’s decision to locate its first facility in WA was partly based on strong European customer support, including EV manufacturers, “seeking responsibly produced, diversified battery graphite supply”, the company says.

A large industrial site was selected, providing significant area for future plant expansion to meet the expected demand.

In October, minnow BlackEarth Minerals (ASX:BEM) raised $1.4m in a placement that was oversubscribed by 50 per cent.

“We’re pleased with the renewed and growing interest in the graphite sector and we believe our Donnelly River assets also offer a unique opportunity to shareholders,” BlackEarth managing director Tom Revy says.