Syrah Resources, an Australian company backed by over $100 million in US government funding, aimed to disrupt China's grip on graphite—a critical mineral for electric vehicle batteries and military uses, as reported by the Wall Street Journal. The company established a mine in Mozambique and a graphite-processing facility in Louisiana, even landing a deal with Tesla.
But China, which produces more than 90% of the globe's battery-grade graphite, boosted output, overloading the market and sending prices plummeting. This prompted Syrah to suspend mining and had its Louisiana plant struggling to find sales. The company's share price has fallen almost 90% since 2023.
China’s control over critical minerals grows
The US and its allies have been attempting to decrease dependence on China for such key minerals as lithium, nickel, cobalt, and graphite. Yet China is becoming increasingly tight-fisted, prohibiting some mineral exports to the US while increasing domestic production.
Chinese companies have raised refined lithium production from 49% of world supply in 2017 to 71% in 2023, and their share of refined nickel from 38% to 55%. Jervois Global, a US-based cobalt miner, shut down operations in 2023, attributing it to low prices due to Chinese overproduction. Lithium behemoth Albemarle has reduced its staff as prices collapsed.
US policy shifts add to the challenge
Syrah initially benefited from US efforts to build a domestic EV supply chain. The Biden administration granted the company a $102 million loan in 2022, followed by a $220 million grant to expand its Louisiana plant. However, policy shifts disrupted those plans.
A 2022 law aimed at discouraging the use of Chinese graphite was expected to favour Syrah, but in May 2024, the Biden administration delayed enforcement for two years. This weakened Syrah’s market position, leading a potential buyer to back out of negotiations.
Political and economic uncertainty ahead
In Mozambique, protests from displaced farmers further disrupted Syrah’s operations, putting the company in default on its US loans. Still, Syrah hopes to resume production once the local government stabilizes. It also expects its Louisiana plant to begin sales later this year, though major automakers remain hesitant to switch from Chinese suppliers.
Looking ahead, Syrah’s fate may hinge on US trade policies. The Trump administration could impose new tariffs on Chinese graphite, benefiting Syrah, or it could scale back EV subsidies, hurting demand for domestically processed graphite. Meanwhile, the Commerce Department is investigating whether China’s low graphite prices constitute unfair trade practices.
Despite setbacks, Syrah has secured a small supply deal with Lucid Motors and is awaiting further contract approvals before expanding operations. However, analysts caution that competing with China’s entrenched supply chains will remain a significant challenge.
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