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Graphite: Strong mid-term demand fundamentals being driven by the electrification of motive transport

Proactive's mining analyst, Dr Ryan D Long, takes a look at what’s going on with graphite demand and examines some of the market players poised to benefit from strong mid-term fundamentals

Syrah Resources Ltd -

Proactive's mining analyst, Dr Ryan D Long, takes a look at what’s going on with graphite demand and examines some of the market players poised to benefit from strong mid-term fundamentals

Graphite, strong mid-term demand fundamentals being driven by the electrification of motive transport

Around ten years ago graphite was tipped to be the next big thing, with graphite explorers appearing with projects all over the globe.

Change on the horizon

Despite the hype surrounding the graphite market, the space largely failed to hold up to the promises made by many juniors at the time.

Despite the broken promises of the last decade there could be a change on the horizon for graphite and graphite juniors.

The global graphite market was valued at US$14.3bn in 2019, which is some way off the US$175bn for global copper production but is still a still a substantial target market for those companies with the right projects.

Also important is the medium-term supply and demand fundamentals for the market, which appear strong with forecasts putting demand growth at an average rate 5.3% to 5.6% between 2020 and 2027, with the market for graphite reaching around US$22bn by 2027.

Electrification key 

Graphite’s traditional markets have always been in refractories, foundry, and lubricates, but the electrification of motive transport has opened up an expansive market with the increased demand for lithium-ion batteries, driving increased demand for graphite.

While, this is a similar story told by those behind the previous boom in graphite explorers, we now appear to be much closer to seeing a substantial increase in global adoption of electric vehicles.

With experts forecasting that electric vehicles will account for 10% of all car sales by 2025, rising toward 20% - 30% by 2030.

This positive outlook for graphite demand is supported by the steady increase in graphite prices for fine, medium and large flakes since September 2017, driven by both the increase in demand for lithium-ion batteries and the contemporaneous improvement in Chinese environmental restrictions that led to numerous mine closures.

During the past decade, Syrah Resources Ltd (ASX:SYR) was one of the few companies to move an exploration project into production, but with the market opening up, what other companies are poised for success.

Runners and riders

Talga Resources Ltd (ASX:TLG) is preparing to produce a range of lithium-ion anode products, using its own in house processing technology and material extracted from its high-grade deposits located in Sweden.

The mine is expected to initial operate initially on a trial basis production, generating around 25,000t of graphite product, which the company then plans to scale up to 100,000t, resulting in around 20,000t of coated anode product.

Talga has also signed a non-binding memorandum of understanding with global trading powerhouse Mitsui & Co., Ltd, to evaluate the potential to jointly develop one of its projects.

Another emerging entrant to the listed junior graphite market is Tirupati Graphite PLC.

Tirupati is a fully integrated graphite company, with operations in Madagascar and India, that are generating operating cash flows.

The company is seeking to list in London this year and plans to use the funds raised to expand its business from its current small-scale commercial operations to a much larger volume of production.

Quick facts: Syrah Resources Ltd

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ASX:SYR
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Market Cap: $132.75 m
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