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London – January 24, 2022 – Graphite, the battery material that serves as the negative end (anode) of the lithium-ion battery and makes up 30% of the entire battery mix. Yes, that means there is more graphite in a lithium-ion battery than there is lithium. Mentioned in today’s commentary includes: Tesla Inc. (NASDAQ:TSLA), ChargePoint Holdings, Inc. (NYSE: CHPT), General Motors (NYSE:GM), Ford (NYSE:F), Blink (NASDAQ:BLNK).
And this year is when the real supply crunch is expected. The on-and-off fears of a lithium supply crunch predicted over the past five years is absolutely nothing compared to the anticipated graphite squeeze. Major EV and battery manufacturers are already said to be looking for more supply security. They are unlikely to find it. As almost all of it is in China. But Graphex Group may be an outlier.
Veteran Industry Players
They’ve been producing graphite with proprietary tech since 2013, and they’re already among the world’s top graphite producers and among the Top 5 in China.
Graphex Group’s CEO is Chan Andross, a 34-year veteran of operations and management who has been with the group since 1991.
President John DeMaio heads up the graphene division and the company’s expansion plans (which include moving into the U.S. and Canada–but more on that later). DeMaio is likewise a 35-year veteran in operational management in the energy and infrastructure sectors. He has served as GM of Siemens Smart Infrastructure division, VP of MWH Global, and GM of SPG Solar, as well as being a board member of JouleSmart Solutions.
Graphex’s Chief Strategy Officer is Dan Nye, a former US Naval officer who went on to lead Asyst Technologies’ semiconductor robotics manufacturing operations–a company whose revenues grew from $80 to $300 million. He also oversaw a $1-billion fund for CIM Investment Management.
Professor Luo Liqun, Graphex Group’s head of graphene technology research, has a PhD in engineering and mineral processing from China’s Wuhan University of Technology, where he now serves as a professor and senior engineer.
These are global graphite experts, advanced technology figureheads, and veterans who have managed to secure long-term contracts with the Chinese government and major EV and battery manufacturers. Now, they say they’re ready to expand and bring it all home.
Planned Expansion: Quadrupling capacity over the next 3 years?
Graphex (GRFXY, 6128.HK) was already producing 10,000 metric tons of battery-ready spherical graphite. And they’ve been doing this since 2013. Their plan for expansion to production of 40,000 metric tons over the next three years is already under way.
Of course, that expansion is planned to support real market fundamentals that simply cannot be ignored. The outlook from my perspective is bullish from every angle:
- The DoE expects the global lithium-ion battery market to grow by a factor of 5-10 in the next decade. That means the same 10X growth potential for graphite, which comprises almost half of every battery.
- The $3-trillion EV market is just one big demand driver… Often overlooked is the massive demand that will come from large-scale battery storage for renewable energy. That energy storage market alone could top $426 billion over the next decade. This isn’t just about cars.
- Spherical graphite demand is expected to rise 30% annually from now until 2030.
- Already this year, we’ll likely experience a graphite supply shortage.
The 10,000 metric tons that Graphex already produces is said to represent around 5% of China’s total spherical graphite production. And the margins at 10,000 metric tons are impressive enough at 28%, helping Graphex bring in a reported $51 million in revenues in 2020. They should only get bigger as graphite prices and demand rise.
The Energy Revolution Is Riding On China…But Not For Long
Graphex Group is planning something that we think hits right at the heart of the supply chain insecurity: It’s bringing this all home … from China.
To fully understand this, it’s important to first understand that regardless of where batteries are manufactured, most of the graphite for all of it originates in China or is at least further processed in China.
There is said to be absolutely nowhere outside of China to process graphite.
Sadly, the U.S. doesn’t currently produce or process any at all. And China isn’t only way ahead of everyone else, but it is likely going to want to hoard that graphite in the battery race. That could leave Western EV and battery manufacturers in a situation where supply chain security is extremely vulnerable–at best.
We can build all the battery gigafactories we want, but that doesn’t mean we’ll have the raw materials to actually produce batteries. That’s where Graphex Group (GRFXY, 6128.HK) is planning to do something that I can’t ignore, as an investor.
It intends to bring its proprietary graphite technology to the U.S. and Europe. It’s working with downstream companies to create solutions for the proposed construction of facilities and production lines for spherical graphite right at home. And the company says its graphite processing technology is protected by 23 patents covering everything from production methods and equipment design to environmental protection and graphene applications. That could save the industry untold millions.
Eventually, Graphex may consider plans to expand downstream into anode and battery production itself.
The bottom line?
There’s so much impact here in one of the fastest-growing segments of the decade. And while much of the big money is being thrown at battery and EV manufacturers, with a nod to lithium miners, we think it’s hard to find something with as much potential as graphite, which so far has managed to stay out of the limelight.
And when you couple this with an opportunity with a company that’s already got a previous track record, with long-term contracts with the Chinese and set up right next to the world’s biggest graphite mine while exploring partnerships with mines outside of China … you might be looking at the kind of potential that only comes up a few times in an investor’s career.
I’m deep into this one as my big play of the New Year, and I’m happy to share it with you. Graphite is the off-the-radar battery king-maker, and I’m certain it may be the material that ends up driving the biggest potential investor rewards as the battery supply chain comes into urgent focus.
Electric Vehicle Producers Are Set To Grow In The Coming Years
General Motors (GM) is going all-in toward an all-electric future, aiming to eliminate all tailpipe emissions from new light-duty vehicles by 2035 as part of a wider strategy to become a carbon-neutral business by 2040.
In a major announcement last year, the highest-selling U.S. automaker said it would offer 30 all-electric models globally by the middle of this decade. A total of 40 percent of the company’s U.S. models offered will be battery electric vehicles (BEVs) by the end of 2025.
Recently, GM dropped another bomb on the market with the announcement of its new business unit, BrightDrop. The company is looking to capture a key share of the burgeoning delivery market, with plans to sell electric vans and services to commercial delivery companies.
Ford (F) is another Detroit veteran making waves in the EV world. In addition to brand-new electric versions of its best-sellers, the F-150 and iconic Mustang, it’s also carving out its own position in the hydrogen race, as well. In fact, it recently even unveiled the world’s first-ever fuel cell hybrid plugin electric vehicle, the Ford Edge HySeries.
Ford became the best-performing auto industry stock last year, beating investor favorite Tesla as it doubled down on an all-electric future. 2021 was “truly a breakthrough year for Ford … easily the most important year strategically for the company since the financial crisis,” Morgan Stanley analyst Adam Jonas told CNBC.
Tesla Inc. (TSLA), despite some dips and controversy along the way, is still the de facto leader of electric vehicle production in the United States. The company accounts for the majority of total EV sales in the country and just broke another production and delivery record last quarter. But legacy carmakers are pouring billions into EVs, and hundreds of new models are coming to the market.
“In a growth market, it’s extremely challenging to maintain majority market share, regardless of industry. … As we start to move toward a larger and really significant number of manufacturers that are going to be playing in the space, Tesla has to lose share.”
Demand for electric vehicles has been ramping up steadily for years. But as we’re approaching the tipping point, there’s a problem that many people are still ignoring And that’s where Chargepoint (CHPT) comes in, one of the largest charging station networks in the country.
This leading EV infrastructure player went earlier this year through one of the market’s hottest trends. That made them the first EV charging stock to have gone public via a reverse merger with a special purpose acquisition company, or SPAC. When it comes to the supercharged Level 2 EV charging stations, ChargePoint is the clear leader in the industry.
Another charging infrastructure company, Blink Charging Co. (BLNK) owns, operates, and provides EV charging equipment and networked EV charging services in the United States.
Blink Charging is a mature company, having been around since 1998. Its unique proposition is that many of the company’s charging stations are found in practical locations, such as airports and hotels, making it convenient for drivers to charge up while waiting on flights or in their rooms.
Blink has also been particularly active inking new deals, including 26 dual-port Level 2 IQ 200 EV charging stations at key Burger King locations across the Northeast; 20 Blink-owned IQ 200 electric vehicle charging services with Illinois’ Blessing Health, and an exclusive seven-year agreement with Lehigh Valley Health Network for the former to own and operate charging stations across the health network’s extensive portfolio of locations.
By. James Stafford
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This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that the global energy transition will continue as anticipated and that electric vehicles will continue to grow in market share and acceptance; that demand for electric vehicle batteries and the component materials and minerals used to produce electric vehicle batteries will continue to grow significantly; that the market for graphite and related products will continue to expand and achieve double digit growth in the next several years ;that there will be shortages in China, U.S. and globally of the graphite necessary to produce electric vehicle batteries; that Graphex Group Limited (the “Company”) can leverage its existing operations and reputation in China to capture market share of global graphite demand; that the Company can expand its business operations to the U.S. and European markets and gain significant market share for the supply of graphite for electric vehicle batteries; that the Company can leverage its proximity to graphite mines to expand its operations and capture market share for global graphite demand; that the Company can achieve its business plans and objectives as anticipated. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the global energy transition may not continue as anticipated and that other types of alternative energy vehicles may be developed and gain market share over current types of electric vehicles; that demand for electric vehicle batteries as currently produced and the component materials and minerals used to currently produce electric vehicle batteries may be less than expected for various reasons including the development of alternative materials and technologies; that the market for graphite and related products may not expand and achieve growth as anticipated; that for various reasons, including production of graphite or alternative technologies by other competitors of the Company, there may not be shortages of or increases in demand for graphite in China, U.S. and/or globally as expected or at all; that the Company may be unable to leverage its existing operations and reputation in China to capture substantial market share of global graphite demand; that the Company may be unsuccessful in the expansion of its business operations to the U.S. and European markets and fail to gain significant market share for the supply of graphite for electric vehicle batteries in China and/or globally; that the Company may be unable to leverage its proximity to graphite mines to expand its operations and capture market share for domestic and global graphite demand; that the business of the Company may be unsuccessful for various reasons. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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