Far East Capital Newsletter
What is China's game with graphite?
28 Oct 2023

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What is China's game with graphite?

It has been another week lacking in inspiration, though the corporate activity in the larger players in the lithium sector has been a standout. Gold continues to be strong, breaking through the US$2,000/oz barrier last night. If ever it was a good time for gold companies to be raising equity, this is it. Expect more funds to flow bullion's way. Graphite stocks rallied in response to the announcement of an export ban by China, on both natural and synthetic graphite, citing national security concerns.

Rather than quote supply side concerns, it would make sense to expand supply rather than restrict exports. Apart from just being aggressive it is difficult to see how China gains from this strategy ... unless ... it is all about increasing the penetration of its EV cars in preference to those produced in the Western world. If the Western world's production of EVs is constrained by a shortage of anodes, China is well positioned to fill the gap. It will still export the anodes, but they will be in the cars themselves rather than as components for Western manufacturers.

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