Cartex: Maybe in 10 to 15 years at the earliest for EV's or battery storage to have a significant move upward in the global market....That's fine. As a bear you can have your opinion. As a bull I look at Volvo, large investments by other large automakers, large battery facilities being developed in Europe and China and think that the inflection point is much sooner. having been in graphite for more than a couple of decades, I have seen the ebb and flow of the graphite industry as well as ups and downs Your past experience in graphite is only relevant to the supply/demand coming from industrial demand. Industrial demand has dominated the graphite market for the past few decades. While small battery has been around for a while it represents very little in terms of natural graphite demand. Point is...your experience has little (or no) relevance to the emergence of graphite demand driven by EV. If anything, it is a liability in your analysis because you will be anchored to old standards as an industry completely changes. and to focus on comparing to iron ore (bulk industrial mineral where the end user processes the ore) is not valid as all natural graphite has to be processed into a usable form or product for qualification where as iron ore is sold as is. My comparison to IO relates to the sharp increases in prices which resulted from sharp increases in demand that came from end users of iron ore. Graphite is seeing the same increase in end demand. But you're right, graphite requires processing before it is shipped, not after. Which makes it LESS of a commodity than iron ore. Which means as demand increases it will be much harder for supply to respond to demand because new firms will need to be qualified (which Syrah is experiencing now). So there's a higher and longer barrier to entry. Which suggests that it will take much longer for supply to outstrip demand. Which implies more $$$ and a premium for equity prices. But my basic argument is that when demand for any commodity product spikes you get a protracted period of extreme profits. And those with quality product and low positioning on the cost curve do well through cycles.
Macro forces have more affect on the graphite industry that most, yet you neglect to mention the shutdown of dozens of operational graphite projects from 1990 to 1993 when the Chinese became the major supplier of natural graphite in the world. Just reinforces my point that low cost quality producers win over time.
Your price increase timeline is not accurate as it occurred from 2009-2012 when China a few years earlier was forced to close a multitude of mining operations (including natural graphite) to comply with the environmental and air quality requirements for the 2008 Olympics and in doing so created an artificial supply perception that increased prices by up to 4 times the levels from 2004-2008. I'm not sure where you get you're data but you're wrong. Iron ore was being driven by the Chinese industrial boom going back to 2004. It continued into and through 2008. . https://www.statista.com/statistics/282830/iron-ore-prices-since-2003/. I can show you five other sources if you require. In 2003 IO was $30, 2004 IO was $36, 2005 IO was $62, 2007 IO $73, 2008 IO $80, 2009 IO was $145. It almost TRIPLED before the spike to $145 in 2009. All the Olmpics did in China was to cause the industrial boom to pause for a brief period. 2009 demand/price increase in IO was driven by the Chinese credit response (which was their reaction to the global slowing caused by the financial crisis). IO prices peaked at $168 in 2011. Many years after the transitory effects of the Olympics. The bigger point is that when the demand spike comes for IO you will see a multi year shift in pricing.
Current total graphite powder usage for all secondary battery applications is ~ 120,000 MT per year; a far cry from the project 500,000 MT as projected in 2015. I'm not sure who projected this but it isn't relevant. What is relevant is what happens from end 2018 going forward. I have demand from battery uses at 135 MT for 2018. EV's base their success on government intervention providing subsidies to both producer and purchaser. Without those subsidies, EV's could not stand alone facing the same market forces that traditional car mfg. has experienced over many decades. Agreed. But battery is a technology. And like almost every technology the price will continue to drop at a faster rate than anticipated. This will directly drive adoption.
Extreme profits for SYR selling precursor feedstock and to refractories at sub US$ 600 MT?? Your definition of extreme profits does not meet the definition. SYR profits MAYBE = US$ 125 to US$ 150 MT?? They are a long way from any extreme profits as they have to discount prices to move the thousands of tonnes in storage just to recover current cash costs. Completely agree. I wasn't arguing that they would make extreme profits in 2018 or 2019. But they will by 2021.
NO company is immune from poor management and financial planning and to make the assertion SYR will weather the cash burn / profit storm is not realistic as ANY company can fall prey to market forces that can affect any company negatively. Wow, you're so intent on the bear argument that you didn't read what I said (or chose to ignore it). My FIRST statement to Stansilar was that there HAS been poor management. I also said that if management doesn't improve they could burn through the $100 million.
BUT, if they improve production and solve the port issue they can get cash flow positive and the company/stock will be fine. If management executes over the next 12 months the stock will trade back to $1 billion market cap because the market will understand their positioning (quality product, large resource, large lead time over any meaningful competitors, and an ability to capture premium pricing downstream).
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