latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/graphite-market-may-turn-on-its-head-experts-warn-43924088 content esgSubNav
In This List

Graphite market may turn on its head, experts warn

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Blog

Insight Weekly: LNG exports surge; investors unfazed by inflation; neobanks drive VC funding

Blog

Essential Metals Mining Insights November 2021

Blog

[Infographic]: 2021 World Exploration Trends


Graphite market may turn on its head, experts warn

Investors enamored with Australian and Toronto-listed graphite plays should take heed that the market could be turned on its head within five years as multiple disruptors lie in their path, experts warn.

Analysis from S&P Global Market Intelligence data revealed 265 projects vying to be the next big thing in the graphite market across 10 countries. Canada has the most active projects at 13, while Australia and Mozambique each have nine.

Further analysis revealed that the number of holes drilled globally with significant intervals has doubled from 35 in the fourth quarter of 2017 to 67 in the current first quarter, with other drill holes soaring from 62 to 145 while the graphite price has risen by about 40% since July 2017.

Yet Warwick Grigor, who started Sydney-based private investment bank Far East Capital Ltd, Research Division with Fortescue Metals Group Ltd. chairman Andrew Forrest, said the graphite market is at a "critical point," with known strong demand ahead but which won't have an impact for another three years potentially.

Grigor, known as a guru of the graphite market in Australia's resources sector as First Graphene Ltd. non-executive chairman, told S&P Global Market Intelligence that there are "easily" another 10 companies planning to hit the market across Tanzania, Mozambique, Madagascar, Australia and Canada, wanting to expand once their first module is operating. Most of them are listed in Australia or Toronto.

While the market is hot for battery mineral stocks, financing still remains a question. Either way, a massive supply response is anticipated, so much depends on whether Syrah Resources Ltd. is successful.

Grigor believes it will take at least six to 12 months for Syrah to fully commission the Balama project properly before they have a real handle on their costs, problems and changes they have to make.

"I wouldn't be looking for another 40% increase [in the graphite price] until we know just what's coming out of Syrah," he said.

"Long-term, we've got to be cognizant that there could be technological changes that change the equation significantly, in terms of what batteries are used, as the introduction of graphene with its superior qualities and the advancement of super-capacitors could change things dramatically."

Lithium-ion batteries are the standard, but Grigor said they're "no good" at below 0 degrees Celsius or above 45 degrees; and danger abounds with the potential for fires and thermal runaways.

"There is a serious risk that supercapacitor technology could dramatically change the equation in five years' time, which is not going to help a lot of these graphite producers," he said.

First Graphene is developing a "BEST battery" with Swinburne University, increasing the energy density of a supercapacity battery by 10 times, which will charge in 15 seconds instead of an hour, won't have chemicals, will weigh a quarter of the weight of lithium ion, and with no risk of fires or thermal runaway.

While that work is still in its early stages, it's but one example of the vast amounts of cash being thrown around globally into storage devices, leading Grigor to believe that "only a naive person would assume the landscape will be the same in five years' time."

Tom Murrell, nonexecutive director of specialty metals-focused junior Walkabout Resources Ltd., told S&P Global Market Intelligence on the sidelines of the Paydirt Battery Minerals Conference in Perth March 14 that the graphite supply chain was also set to gain greater visibility as pricing is currently opaque.

"Graphite is traded by very old, family run traders who hold all the power, and now with social media and the democratization of information, and more two-way flow of information, we believe the whole supply chain pricing is going to be totally disrupted," Murrell said.

He sees the graphite industry going through a similar transformation as what Western Australia's wheat industry experienced 30 years ago.

The state was a bulk exporter of what used to be called Australian Standard White, a bulk commodity with low prices, before niche markets developed with the emergence of the Japanese udon market with very specific protein content, so farmers grew such wheat under direct contract.

"We see a similar transformation with graphite where end users will have very tight specifications around the quality of their graphite, and it will be forward-contracted, because they really want security of supply," Murrell said.