Major themes are already emerging: supply chains are likely to become increasingly localized, the electrification of the worlds vehicle fleet is set to gather pace, and markets in general are becoming more wary of the monopolistic tendencies of some countries as regards commodities.
With its graphite production in Mozambique Syrah covers all these bases and, as its shares are currently trading at a relatively lowly A$0.31, also offers investors an entry point to the future at a reasonable price.
But what exactly is possible here?
Well, for context, its worth noting that when the Australian graphite boom was in full swing Syrahs shares were trading at around 20 times higher than they are now. Back then though, there was a bubble mentality in the market and actualization of the companys plans was still some way off.
This time round the market is in a fairly sober mood, following months of coronavirus-related lockdowns, but Syrah is now that much closer to becoming one of the worlds major players in anode graphite production.
Indeed, at the start of the year, as graphite prices stumbled, Syrah took the decision to cut back on production to some degree, in order to assist in balancing the market. Once youre taking decisions like that, you know youve reached a position of some relevance.
The questions now are: what will that market do next, and what will Syrah do next?
A key point of departure when it comes to answering both of these questions is to consider Syrahs ongoing expansion into upstream operations in the USA.
In 2019 the company sold of the order of 160,000 tonnes of natural graphite, of which around 120,000 tonnes of fines graphite went into the Chinese market, one of the biggest in the world.
That key market will remain in place for Syrah in the years ahead, but opening up America too puts the company much further up the value chain. Currently, 100% of anode precursor, the processed material that actually ends up being used in batteries, is produced in China. And 100% of coated precursor, the finished product, is produced in Asia.
But that is about to change.
“The aim,” says Syrahs Kristian Stella, “to become the first ex-China vertically integrated producer of finished anode material from natural graphite.”
The anodes in question are the negative electrodes of lithium ion batteries, which almost everyone expects to proliferate in the coming years. Vehicle sales as a whole took a hit during the coronavirus crisis, but it was notable that in the US Tesla (NASDAQ:TSLA) outsold everybody else. Meanwhile, charging infrastructure is increasingly being rolled out and, with the word just having reminded itself of what a major reduction of atmospheric emissions would feel like, there is plenty of positive sentiment around.
And unlike many companies around, Syrah is already well positioned to take advantage. In 2018 the company bought a site in Louisiana, where it subsequently produced unpurified spherical graphite and sent out a batch of samples to potential customers.
“The intent ultimately is to address the ex-Asia market,” says Stella.
“We initially established in the USA, but since that time European electric vehicle sales have gained momentum. So, we see the potential to export from the USARead More – Source