So many things have become clearer at the turn of the year, and from an investment perspective, there is one overwhelmingly obvious theme: There is money to be made at every point along the battery supply chain.
There are a lot of options here, but very few that fly far enough under the radar to make for a potentially lucrative back-door entryway into this supply chain.
I’ve found what could be the perfect back door.
And to me the boxes I’m looking to tick here are significant ones:
- I wanted a back door into the supply chain that is as big as (or bigger than) lithium but not nearly as obvious.
- I wanted industry veterans this time; not new entrants throwing their hat in the ring without much of a track record.
- I wanted a company that already has attractive margins and is on track for exceptional growth.
- I wanted a new element of growth (not simply expansion) that takes into account the enormous needs of the $3-trillion EV industry.
So what is the back-door entry here? 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.
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.
So, graphite is where I started my search, and Graphex Group is where I ended it.
Why Graphex Group?
Again, it ticks every single box on my list…
These are veteran industry players, not newcomers
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?
So, I liked the fact that Graphex (OTCQX: GRFXY, 6128.HK) was already producing 10,000 metric tons of battery-ready spherical graphite. (If you aren’t familiar with spherical graphite, it’s another name for “battery grade” graphite produced from flake graphite).
And I liked that they’ve been doing this since 2013. But given the timing of the EV expansion and–among many other things–the 13 battery gigafactories expected to be built in the U.S. alone, I wanted to see some very well-timed expansion plans.
That’s where Graphex ticked another important box: 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.
Here we are, in the midst of an energy revolution and totally dependent on China…
4X production capacity isn’t the only thing that really caught my attention with this one.
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.
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.
As a technology company focused on production, processing and enrichment and not just a graphite producer, Graphex proprietary technology could be used to enable miners to upgrade less valuable flake graphite into far more valuable uncoated spherical or coated spherical graphite.
That’s a current difference of about $600 per ton and up to $12,000 per ton.
And I’m in this one for the long haul, too, because beyond the planned 4X expansion and what look to be brilliant global technology capabilities and revenue stream potential of national security value … I’m also interested in Graphex’s long-term plans to partner with auto manufacturing supply chain companies in advanced battery spherical graphite production at home.
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.
You can find out more about Graphex at the following links:
U.S. Symbol: https://finance.yahoo.com/quote/GRFXY?p=GRFXY
Hong Kong symbol: https://finance.yahoo.com/quote/6128.HK/?p=6128.HK
Electric Vehicle Producers Are Set To Grow In The Coming Years
General Motors (NYSE: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.
GM isn’t just betting big on EVs, either. It’s also looking to capitalize on the autonomous vehicle boom. Recently, it announced that it’s a majority-owned subsidiary, Cruise, has just received approval from the California DMV to test its autonomous vehicles without a driver. And while they’re not the first to receive such an approval, it’s still huge news for GM.
Cruise CEO Dan Ammann wrote in a Medium post, “Before the end of the year, we’ll be sending cars out onto the streets of SF — without gasoline and without anyone at the wheel. Because safely removing the driver is the true benchmark of a self-driving car, and because burning fossil fuels is no way to build the future of transportation.”
Ford (NYSE: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.
This year saw soaring orders for the company’s Mustang Mach-3 SUV, including an order for 184 of the EVs from several New York City government agencies. The order comes in at $11.5 million, putting the price tag for the Mach-3 SUV at $62,500. Yet people are buying them like hot cakes based on order numbers.
And it’s not just the Mach-3, either. Last month, Ford had to halt reservations for the upcoming F-150 Lightning pickup truck after hitting 200,000.
Tesla Inc. (NASDAQ: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.
“It’s no surprise that Tesla’s still dominating electric vehicle sales because they’re the only ones that really have viable products in full swing,” IHS Markit associate director Michael Fiske told CNBC.
“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.”
Tesla’s biggest rival in China, Nio Limited (NYSE:NIO) is looking to take on the king in its homeland. The company is ramping up sales and trimming its financials, and starting to make headway domestically.
Nio plans to build 4,000 battery-swapping stations worldwide by 2025, Reuters has reported, citing the company’s president Qin Lihong.
Battery swapping is emerging as a quicker alternative to EV charging, which often still takes hours, making EVs less appealing to potential buyers. Yet swapping a battery could take about as little as it takes to fill a tank of gasoline, which may make this approach to charging even more popular in the future.
Nio plans to start small, with 700 battery-swapping stations this year, before adding another three thousand and change over the next five years.
Another up-and-comer in China is Xpeng Motors (NYSE:XPEV). It has developed an all-electric, fully autonomous car that can be ordered with a few taps on your phone. It features a range of 250 miles and will get you from point A to B in less time than it would take to hail a cab or drive yourself. This game-changing company is set to disrupt the world’s automotive industry with unparalleled convenience and affordability for everyone.
Xpeng has also been drawing plenty of interest from Big Money, managing to raise nearly a billion dollars from heavy hitters such as Alibaba, Abu Dhabi’s sovereign wealth fund Mubadala Qatar Investment Authority, Hillhouse Capital, and Sequoia Capital China.
Total EV sales in China surged by 154 percent to 3.3 million last year, ZoZo Go estimates. Carmakers BYD—backed by Warren Buffett—as well as Wuling and Xpeng achieved record-high sales in December.
Moreover, China accounted for more than half of all EVs sold globally in 2021, ZoZo Go says.
This year, robust growth is set to continue because subsidies are no longer a factor, said Michael J. Dunne, CEO at ZoZo Go.
“Until 2020, most EV sales in China were induced via subsidies, rebates and quotas. That era is over. NIO, Xpeng and BYD are building world-class EVs that Chinese buyers are embracing on their own merits. Subsidies are no longer a factor,” Dunne wrote earlier this month.
Li Auto (NASDAQ:LI) is another up-and-comer in the Chinese electric vehicle space. And while it may not be a veteran in the market like Tesla or even NIO, it’s quickly making waves on Wall Street. Backed by Chinese giants Meituan and Bytedance, Li has taken a different approach to the electric vehicle market. Instead of opting for pure-electric cars, it is giving consumers a choice with its stylish crossover hybrid SUV. This popular vehicle can be powered with gasoline or electricity, taking the edge off drivers who may not have a charging station or a gas station nearby.
Li Auto has already seen its stock price nearly double since its IPO. And though it hasn’t quite returned to its all-time highs, it remains a fairly stable stock. It’s already worth more than $30 billion but it’s just getting started. And as the EV boom accelerates into high gear, the sky is the limit for Li and its competitors.
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 (NYSE: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.
While Level 1 stations allow you to charge a Mercedes B Class 250e in around 20 hours…Level 2 chargers cut that down to just 3 hours to fully charge that same vehicle.
That’s a massive difference for people worried about having to spend nearly a day charging their vehicles before getting back on the road. And ChargePoint has a whopping 73% of the market share of networked Level 2 charging stations.
Another charging infrastructure company, Blink Charging Co. (NASDAQ:BLNK) owns, operates, and provides EV charging equipment and networked EV charging services in the United States.
Blink Charging really 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.
GreenPower Motor (TSX:GPV) is an exciting company that produces larger-scale electric transportation. Right now, it is primarily focused on the North American market, but the sky is the limit as the pressure to go green grows. GreenPower has been on the frontlines of the electric movement, manufacturing affordable battery-electric busses and trucks for over ten years. From school busses to long-distance public transit, GreenPower’s impact on the sector can’t be ignored.
NFI Group (TSX:NFI) is another one of Canada’s most exciting electric mass-transit makers. Though it has not yet rebounded from January highs, NFI still offers investors a promising opportunity to capitalize on the electric vehicle boom at a discount. In addition to its increasingly positive financial reports, it is also one of the few in the business that actually pay dividends out to its investors. This is huge because it gives investors an opportunity to gain exposure to this booming industry while the stock is cheap and hold steady until the market finally discovers this gem.
Another way to gain exposure to the electric vehicle industry is through AutoCanada (TSX:ACQ), a company that operates auto-dealerships through Canada. The company carries a wide variety of new and used vehicles and has all types of financial options available to fit the needs of any consumer. While sales have slumped this year due to the COVID-19 pandemic, AutoCanada will likely see a rebound as both buying power and the demand for electric vehicles increases. As more new exciting EVs hit the market, AutoCanada will surely be able to ride the wave.
Lithium Americas Corp. (TSX:LAC) is one of America’s most critical and promising pure-play lithium companies. With two world-class lithium projects in Argentina and Nevada, Lithium Americas is well-positioned to ride the wave of growing lithium demand in the years to come. It’s already raised nearly a billion dollars in equity and debt, showing that investors have a ton of interest in the company’s ambitious plans.
Lithium America is not looking over the growing pressure from investors for responsible and sustainable mining, either. In fact, one of its primary goals is to create a positive impact on society and the environment through its projects. This includes cleaner mining tech, strong workplace safety practices, a range of opportunities for employees, and strong relationships with local governments to ensure that not only are its employees being taken care of but local communities, as well.
Celestica (TSX:CLS) is a key company in the resource boom due to is role as one of the top manufacturers of electronics in North America. Celestica’s wide range of products includes but is not limited to communications solutions, enterprise and cloud services, aerospace and defense products, renewable energy, and even healthcare tech.
Due to its exposure to the renewable energy market, Celestica’s future is tied hand-in-hand with the green energy boom that’s sweeping the world at the moment. It helps build smart and efficient products that integrate the latest in power generation, conversion and management technology to deliver smarter, more efficient grid and off-grid applications for the world’s leading energy equipment manufacturers and producers.
Teck Resources (TSX:TECK) could be one of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy, Gold, Silver and Molybdenum assets. It’s even involved in the oil scene! With its free cash flow and a lower volatility outlook for base metals in combination with a growing push for copper and zinc to create batteries, Teck could emerge as one of the year’s most exciting miners.
Though Teck has not quite returned to its January highs, it has seen a promising rebound since April lows. In addition to its positive trajectory, the company has seen a fair amount of insider buying, which tells shareholders that the management team is serious about continuing to add shareholder value. In addition to insider buying, Teck has been added to a number of hedge fund portfolios as well, suggesting that not only do insiders believe in the company, but also the smart money that’s really driving the markets.
By. James Stafford
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ
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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