The Supply Shortage That Could Derail The Electric Car Boom

Key battery metals are dealing with a scarcity because the Ukraine-Russia struggle heats up

An already voracious commodity supercycle is now witnessing even larger momentum amid fears of main supply-chain disruption and fallout from Russia’s struggle on Ukraine that has despatched markets right into a tailspin. 

Provide shortages of key battery supplies from lithium and cobalt to nickel and graphite have been looming massive over the EV trade because the second half of final yr. Now, these fears have been compounded. 

With EV gross sales anticipated to double this yr, auto giants are determined to keep away from battery provide chain disruptions and hovering prices of uncooked supplies. 

And the provision chain for all of those battery supplies are actually a matter of nationwide curiosity for america authorities. The Biden Administration has been very clear about their want and push in direction of a extra strong US based mostly EV provide chain.

Whereas the majority of the media consideration has been on lithium, an excellent greater scarcity might threaten one other key battery materials: graphite. 

Chatting with S&P Global Platts, Tirupati CEO Shishir Poddar mentioned that by 2030, graphite demand is predicted to be triple our international manufacturing functionality. Poddar notes that we’ll want as much as Four to five million tons extra per yr of graphite. 

That places the onus–and what could possibly be a significant alternative–on graphite miners. Compounding that’s the truth that as soon as the graphite is out of the bottom, is when the specialised ability and worth addition comes into play.  Battery grade graphite anode materials is difficult to course of, particularly at scale, with vital obstacles to entry.

This may occasionally present a significant alternative for one of many world’s high graphite processing firms, Graphex Group Ltd (OTC:GRFXY)

Not solely does Graphex have operations in North America, nevertheless it additionally has processing services up and operating in Asia producing this key battery materials for nearly 10 years proper subsequent to one of many world’s largest graphite mines. 

That would make it a essential bridge between the required present scale of Asian graphite and america, and extra importantly … a key potential step in decreasing North America’s battery materials dependence by localizing the ultimate processing for the rising EV battery producers constructing factories within the US. 

Now, Graphex is gearing as much as listing on the New York Stock Exchange (NYSE), making the chance much more thrilling to us. 

The $50-Billion Graphite Alternative

The worldwide graphite market is projected to be price $50 billion by the end of this decade. 

Why?

It’s easy: Graphite makes up between20%-30% of the fabric of each EV or power storage battery, serving because the unfavorable finish, or the “anode”, with out which there isn’t a lithium-ion battery in any respect. 

With international EV gross sales anticipated to double this yr alone in an electrical car market that’s already price $3-trillion … 

With battery gigafactories being constructed up at a tempo by no means seen earlier than in any trade …

And with only a U.S. power storage market anticipated to develop to $426 billion over the following decade …

The graphite and native processed graphite scarcity might not simply be imminent, it’s upon us. 

Demand is already hovering: 

However it’s about to skyrocket. 

In america, roughly13 new battery gigafactories are mentioned to be within the works, which can be inflicting panic alongside the battery materials provide chain. Worldwide, these factories are rapidly dotting the panorama including desperation to producers who’re scrambling for materials offtake deals. 

100% of Present World Processed Graphite Comes from Asia and 70% of Mined Graphite Comes from China: Graphex Has a Answer

The USA hasn’t produced any graphite in many years. 

That leaves China, the one nation that has any notable graphite processing services. Actually, a lot of the graphite we use originates in China and close to 100% of the processed graphite comes from China.

Some 70% of all graphite utilized for the EV and Vitality Storage trade comes from China, and Graphex Group Ltd (OTC:GRFXY) by way of their wholly owned subsidiaries is reported to be one of many Prime 5 producers in China of spherical graphite manufacturing and one of many high producers on this planet. 

Graphex has been working within the graphite processing enterprise in China since 2013. 

Its processing services in China’s Heilongjiang Province are proper subsequent to one of many largest flake graphite supply on this planet: 

However now, it has a solution to North America’s dependence drawback: Graphex says it’s gearing as much as construct a bridge for this graphite that leads again dwelling.  

This isn’t a model new junior miner with loads left to show to buyers. 

Graphex already has long-term contracts with state owned mines and offtake agreements with main producers alongside the battery and EV provide chain.  

Now, with Graphex already anticipating double-digit development, it’s not solely engaged on a significant enlargement of manufacturing …

It’s working to convey its processing expertise to North America, too. 

In line with Graphex executives, the corporate is producing 10,000 metric tons of spherical graphite, representing round 5% of China’s whole spherical graphite manufacturing. It plans to expand that production to 40,000 metric tons over the following three years. 

On January 7, 2022, Graphex introduced plans to construct a new graphite processing facility in Michigan to assist American EV battery manufacturing, signing an unique MOU with Emerald Vitality Options LLC. A remaining location choice is predicted by the tip of this month, and the corporate expects that the plant could possibly be operational by the second quarter of subsequent yr, with an preliminary capability of 10,000 metric tons every year (TPA) of coated spherical graphite–the sort particularly utilized in EV batteries. 

Plans are to ramp that as much as 20,000 TPA to fulfill hovering demand. 

To be clear… Graphex has already positioned itself as a vertical energy home within the graphite provide chain. A global firm with their very own capabilities to course of at their very own services in China, their very own export license for these supplies and a constructing their very own remaining stage manufacturing facility within the US.  

A Vital Ramp-Up on the Begin of a Supercycle

Graphex margins up to now look nice to us, and that’s what we’d anticipate when you’ve veterans within the subject. 

In 2021, Graphex (OTC:GRFXY) reported 28% margins and $51 million in revenues. With an enlargement in China underway, potential partnerships with international graphite producers for extra localized uncooked materials and plans afoot to construct a brand new processing facility in america, the timing of the chance could possibly be essential for shareholders. 

One of the vital vital elements from our perspective is that all the Graphex processing expertise just isn’t solely protected by patents–23 in whole–masking all the things from manufacturing strategies and gear design to environmental safety and graphene functions… However the barrier to entry for brand new native producers can take a few years to get previous QA testing.  During the last 10 years Graphex has confirmed manufacturing and high quality at scale.

Bringing all of this expertise house is a win-win state of affairs. For North American producers, it might save tons of cash at a time when rising costs for battery uncooked supplies and disrupted provide chains for remaining processed supplies are making issues tough. 

With no present operational processing services in North America, graphite miners at present don’t have the confirmed capabilities to improve from flake graphite to uncoated or coated spherical graphite–the sort that’s prepared for EV battery utilization. Graphex has the confirmed capabilities to assist fill that void on that profitable provide chain, uncooked to remaining battery grade materials prices vary from roughly $700 to over $20,000 per metric ton. 

Probably very profitable certainly….

Past Michigan, Graphex (OTC:GRFXY) might have longer-term plans to companion with auto provide chain firms for the manufacturing of coated spherical graphite, with downstream enlargement into anode and battery manufacturing in addition to to companion with different international uncooked graphite miners to assist localize and resolve provide chain points.

The world hasn’t seen a commodities supercycle like this …

And the Russia-Ukraine struggle is sending an already clear supercycle into what might develop into megacycle territory, from oil and fuel, grains, and valuable metals to industrial supplies, and particularly battery supplies that have been already looking at a provide squeeze. 

Whereas China has historically equipped some 70% of the graphite we use, as of the tip of 2021, new knowledge exhibits that it has now secured over 80% of that market share. And one of many high 5 in China is similar firm that’s planning to convey all of it dwelling to America. 

This isn’t a simple recreation for brand new entrants as a result of graphite is an advanced endeavor underpinning a $3-trillion EV trade and what could possibly be a vastly greater power storage trade. We’re searching for the veterans, like Graphex– with patents, margins, main enlargement plans underway, and what could possibly be the essential bridge to uncooked materials at scale to ship present provide right now in addition to assist form the trade’s future into tomorrow. 

Different firms that could possibly be impacted by the commodity supercycle:

Lithium Americas Corp. (NYSE:LAC, TSX:LAC) is certainly one of North America’s most vital and profitable pure-play lithium firms, making it a key frontrunner within the commodity worth increase. With two world-class lithium initiatives in Argentina and Nevada, Lithium Americas is well-positioned to journey the wave of rising lithium demand within the years to come back. It’s already raised almost a billion {dollars} in fairness and debt, exhibiting that buyers have a ton of curiosity within the firm’s bold plans, and it’ll doubtless proceed its promising development and enlargement for years to come back. Particularly if lithium costs proceed to soar.

It’s not ignoring the rising demand from buyers for accountable and sustainable mining, both. Actually, certainly one of its main targets is to create a constructive affect on society and the atmosphere by its initiatives. This consists of cleaner mining tech, sturdy office security practices, a spread of alternatives for workers, and robust relationships with native governments to make sure that not solely are its workers being taken care of, however locals as properly.

Turquoise Hill Assets Ltd. (NYSE:TRQ, TSX:TRQ) is one other main miner in Canada’s useful resource and mineral trade. It’s a main producer of coal and zinc, two sources with distinctly completely different futures. Whereas headlines are already touting the tip of coal, zinc is a mineral that may play a key function in the way forward for power for years and years to come back. And due partly to the continuing battle in Ukraine, zinc has seen its worth soar on fears of a looming provide squeeze.

Along with its zinc operations, Turquoise Hill can also be a major producer of Uranium. Uranium is a key materials within the manufacturing of nuclear power, which many analysts are suggesting could possibly be a significant element within the international transition to cleaner power. Whereas the mineral has not seen vital worth motion lately, there are a variety of latest initiatives set to come back on-line throughout the globe within the medium time period, which could possibly be a boon to Turquoise Hill, particularly as commodity costs proceed to climb.

Teck Assets (NYSE:TECK, TSX:TECK) could possibly be one of many best-diversified miners on the market. And in occasions like these, that’s nice information. With a broad portfolio of Copper, Zinc, Vitality,  Gold, Silver and Molybdenum belongings, Teck is properly positioned to capitalize on the commodity supercycle. With its free money circulate and a decrease volatility outlook for base metals together with a rising push for copper and zinc to create batteries, Teck might emerge as one of many yr’s most enjoyable miners, particularly as metals costs proceed to soar.

Teck has had an awesome yr, climbing from simply $28 in January, to right now’s worth of $42, representing a 44% return. Along with its constructive trajectory, the corporate has seen a good quantity of insider shopping for, which tells shareholders that the administration crew is critical about persevering with so as to add shareholder worth. Along with insider shopping for, Teck has been added to numerous hedge fund portfolios as properly, suggesting that not solely do insiders imagine within the firm, but additionally the good cash that’s actually driving the markets. And it’s straightforward to see why. Even with its share worth hovering, it’s nonetheless at a P/E ratio of 10.13, with some saying it’s nonetheless considerably undervalued. 

And who might overlook about Tesla Inc. (NASDAQ:TSLA)? In any dialogue regarding commodities or power, it’s inconceivable to disregard Tesla’s rising affect. Elon Musk is actually a visionary of the occasions. Actually, when Tesla launched the primary Roadster again in 2008, folks have been laughing at first-gen EVs. From his electrical car improvements and area ambitions to his forward-thinking strategy to cryptocurrencies, Elon Musk might properly develop into the primary trillionaire, and Tesla shareholders are set to journey the wave.

Since then, Musk has reworked how power just isn’t solely gathered, however saved, as properly. Tesla has even paving the best way for brand new lithium extraction strategies and pushing the boundaries of technological know-how to scale back its dependency on cobalt, an trade synonymous with human rights violations and battle.

Tesla’s inventory worth has had a turbulent yr. The corporate has seen its share worth fall from $1200 at the start of 2022 to its present worth of just below $800. However some analysts are predicting that the dramatic surge in oil costs, and by extension, gasoline costs might lead to demand destruction as shoppers lastly make the change to electrical automobiles. And that’s nice for Tesla.

Celestica (NYSE:CLS, TSX:CLS) is a key firm within the lithium increase on account of is function as one of many high producers of electronics within the Americas. Celestica’s big selection of merchandise consists of however just isn’t restricted to communications options, enterprise and cloud providers, aerospace and protection merchandise, renewable power and sufficient well being expertise.

Due to its publicity to the renewable power market, Celestica’s future is tied hand-in-hand with the inexperienced power increase that’s sweeping the world in the intervening time. It helps construct good and environment friendly merchandise that combine the most recent in energy technology, conversion and administration expertise to ship smarter, extra environment friendly grid and off-grid functions for the world’s main power gear producers and builders.

Suncor (NYSE:SU, TSX:SU) is one other firm that might profit from the rise in commodity costs. Oil, specifically. Actually, it’s simply touched a 52-week excessive, and if costs proceed to climb, so may its inventory worth. And enjoyable truth, Canada is certainly one of America’s main oil suppliers. Not solely that, it’s keen to ramp up provide to assist offset the misplaced crude from america’ import ban on Russian oil.

Suncor has seen its inventory worth rise by 24% already this yr. Not solely that, it packs a noteworthy dividend yield of 4.15%. The kicker right here is that analysts see oil costs persevering with to extend within the short-to-medium time period, which means Suncor’s share worth has some main upside potential nonetheless. 

By. Josh Owens

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ

CAREFULLY**

Ahead-Wanting Statements

This publication incorporates forward-looking data which is topic to a wide range of dangers and uncertainties and different elements that might trigger precise occasions or outcomes to vary from these projected within the forward-looking statements. Ahead trying statements on this publication embody that the worldwide power transition will proceed as anticipated and that electrical automobiles will proceed to develop in market share and acceptance; that demand for electrical car batteries and the element supplies and minerals used to supply electrical car batteries will proceed to develop considerably; that the marketplace for graphite and associated merchandise will proceed to broaden and obtain double digit development within the subsequent a number of years ;that there might be shortages in China, U.S. and globally of the graphite obligatory to supply electrical car batteries; that Graphex Group Restricted (the “Firm”) can leverage its present operations and repute in China to seize market share of worldwide graphite demand; that the Firm can broaden its enterprise operations to the U.S. and European markets and achieve vital market share for the provision of graphite for electrical car batteries; that the Firm can leverage its proximity to graphite mines to broaden its operations and seize market share for international graphite demand; that the Firm can obtain its enterprise plans and targets as anticipated. These forward-looking statements are topic to a wide range of dangers and uncertainties and different elements that might trigger precise occasions or outcomes to vary materially from these projected within the forward-looking data.  Dangers that might change or stop these statements from coming to fruition embody that the worldwide power transition might not proceed as anticipated and that different sorts of various power automobiles could also be developed and achieve market share over present sorts of electrical automobiles; that demand for electrical car batteries as at present produced and the element supplies and minerals used to at present produce electrical car batteries could also be lower than anticipated for numerous causes together with the event of other supplies and applied sciences; that the marketplace for graphite and associated merchandise might not broaden and obtain development as anticipated; that for numerous causes, together with manufacturing of graphite or various applied sciences by different opponents of the Firm, there is probably not shortages of or will increase in demand for graphite in China, U.S. and/or globally as anticipated or in any respect; that the Firm could also be unable to leverage its present operations and repute in China to seize substantial market share of worldwide graphite demand; that the Firm could also be unsuccessful within the enlargement of its enterprise operations to the U.S. and European markets and fail to realize vital market share for the provision of graphite for electrical car batteries in China and/or globally; that the Firm could also be unable to leverage its proximity to graphite mines to broaden its operations and seize market share for home and international graphite demand; that the enterprise of the Firm could also be unsuccessful for numerous causes. The forward-looking data contained herein is given as of the date hereof and we assume no accountability to replace or revise such data to replicate new occasions or circumstances, besides as required by regulation.

DISCLAIMERS

This communication is for leisure functions solely. By no means make investments purely based mostly on our communication. We’ve got not been compensated by Graphex however might sooner or later be compensated to conduct investor consciousness promoting and advertising for OTCQX: GRFXY. The knowledge in our communications and on our web site has not been independently verified and isn’t assured to be right. Value targets that we have now listed on this article are our opinions based mostly on restricted evaluation, however we aren’t skilled monetary analysts so worth targets are to not be relied on.

SHARE OWNERSHIP. The proprietor of Oilprice.com owns shares of Graphex Group Restricted and subsequently has an extra incentive to see the featured firm’s inventory carry out properly. The proprietor of Oilprice.com won’t notify the market when it decides to purchase extra or promote shares of this issuer available in the market. The proprietor of Oilprice.com might be shopping for and promoting shares of this issuer for its personal revenue. That is why we stress that you just conduct intensive due diligence in addition to search the recommendation of your monetary advisor or a registered broker-dealer earlier than investing in any securities. 

NOT AN INVESTMENT ADVISOR. The Firm just isn’t registered or licensed by any governing physique in any jurisdiction to provide investing recommendation or present funding suggestion.

ALWAYS DO YOUR OWN RESEARCH and seek the advice of with a licensed funding skilled earlier than investing. This communication shouldn’t be used as a foundation for making any funding.

RISK OF INVESTING. Investing is inherently dangerous. Do not commerce with cash you may’t afford to lose. That is neither a solicitation nor a suggestion to Purchase/Promote securities. No illustration is being made that any inventory acquisition will or is prone to obtain earnings.