Why The Graphite Sector Is Heating Up, How To Evaluate Opportunities, And What I Own During the graphite boom in 2012, investors experienced a huge run-up in graphite stocks, only to be let down as their performance drastically outpaced their fundamentals. There is now an opportunity for contrarian investors to re-evaluate the sector given recent events: the stabilization of prices; projects starting-up or near production; and off-take agreements being signed. Blue-sky potential remains enormous from the incremental demand that will be created by ‘technology grade graphite’ to be used in emerging green initiatives and clean technology. Supply and demand trends are extremely encouraging, spurred largely by resource nationalism, industry consolidation, and Tesla's gigafactory which alone is supposed to at least double worldwide graphite demand by 2020. The NIA graphite explorers index is up ~70% YTD, posting most of those gains quietly this summer, and primarily by advanced projects which are still a ways off their all-time.
Current Uses and Future Growth Applications
Graphite has been referred to as the material used in every industry yet in small enough quantities that no one talks about it. The majority of the world's graphite is used in traditional applications such as refractories, steel-making, foundry moldings, auto parts, and lubricants. Minor uses such as batteries, pencils, electronics, and numerous other products account for the remaining graphite consumed each year.
Future demand growth is anticipated to be driven by 'technology grade graphite', to be used in emerging green initiatives and clean technology. Including applications in fuel cells, lithium-ion and vanadium redox batteries, energy storage, solar power, water purification, and pebble-bed nuclear reactors. Not to mention graphene, coequally dubbed the 'miracle material', a one atom thick layer of carbon atoms which some researchers claim "it's the most important substance to be created since the first synthetic plastic more than 100 years ago."
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