Syrah Resources (ASX: SYR) shares are up 44%. SYR shares have jumped in reaction to the Chinse licenses on exports of graphite. It’s not so much that China is the world’s major producer, it’s that it’s the world’s major processor of the material into battery ready form. It’s also not that this is about the create massive problems for battery production because it isn’t - most of the world’s battery production retains access as it’s in China, or Chinese companies. What might matter in the future is the price for future battery graphite production and processing - thus the impact upon Syrah Resources. We might also suggest that this could impact Tirupati Graphite.
We had a look a few months back at Syrah Resources: “Syrah Resources (ASX: SYR) (FRA: 3S7) (OTCPK: SYAAF) shares are down 16% in heavy trade. The SYR share price is declining on the back of their quarterly and half-year results. They've actually had to stop production because no one is buying their lovely natural graphite. Yes, even in the midst of the battery boom they've had problems in shifting battery components. This doesn't really bode well if we think about it.” That’s perhaps not a good sign.
That would also explain why there are large short positions - as much as 11% - in SYR shares.
Syrah Resources share price from Google Finance
Those shorts will, of course, be hurting right now but anyone who has been short for any length of time will be OK - the decline has been fairly large over time. There could be an element of a short squeeze increasing the effect of this news but we’ll not know that until we’re able to see the new short numbers in a day or three.
It’s also possible that the base technology is going to change: “Syrah Resources, the ASX-listed graphite producer, is set for a moment in the sun with demand for the key battery material expected to send spot prices up by more than 50 per cent, according to brokers at UBS. Stock in Syrah surged nearly 15 per cent following the publication of the investment bank’s analysis on Friday, which estimates electric vehicle automakers will adopt cheaper lithium iron phosphate batteries.”
Could be, although we think the impact of that would be long term if it were indeed to happen. This current price change is about export restrictions: “China, the world's largest graphite producer and exporter, will require export permits as of Dec. 1 for some graphite products, including spherical graphite used by automakers. It refines more than 90% of the world's graphite into the material used in almost all EV battery anodes, which is the negatively charged portion of a battery.”
Any uplift will last as long as it takes to build new production lines - for the shortage, if any, is in processing capacity, not mine.