Syrah Resources confirms global move away from Chinese battery metals with Posco deal

Syrah Resources (ASX: SYR) says the signing of a binding offtake agreement with South Korea’s Posco Future M further confirms a move away from Chinese suppliers of battery metals such as active anode material (AAM).

Posco Future M (previously Posco Chemical) is a major battery materials business producing cathode active materials and AAM.

AAM has been identified as a key ingredient in the modern batteries for electric vehicles (EVs) and energy storage and Syrah says recent Chinese and US government moves have made sourcing battery materials outside of China more attractive.

The natural graphite fines from Syrah’s Balama operations in Mozambique are considered a globally important source for AAMs, with Posco Future M one of a number of companies interested in offtake agreements.

Syrah managing director Shaun Verner said the Posco deal highlights his company’s unique position in having natural graphite and AAM supply outside of China.

Global production leader

He said Posco Future M is one of the largest AAM producers globally and is planning to significantly increase its natural graphite AAM production capacity this decade.

“Furthermore, there is increasing interest from battery manufacturers and auto original equipment manufacturers (OEMs) in directly contracting sustainable upstream supply of ex-China natural graphite for anode processing partners,” Mr Verner said.

This has become more urgent following the decision on 1 December 2023 of China’s Ministry of Commerce and General Administration of Customs to implement export controls for designated “dual-use” graphite products used in commercial and defense applications including batteries, citing safeguarding of national security and interests.

Licencing controls

Export licencing controls now apply to all consignments of natural graphite and its products – including uncoated spherical graphite, coated spherical graphite and expandable graphite – from China to all export destinations.

Ex-China AAM and battery supply chains are currently largely reliant on Chinese natural graphite and AAM exports.

“These licensing controls introduce greater uncertainty, increased administrative barriers and delays in export supply of the designated graphite materials from China and heighten the criticality of ex-China supply of graphite materials for the lithium-ion battery chain in particular,” Mr Verner said.

Strategic importance of ex-China supply chains

He added that North American battery manufacturers and auto OEMs are focused on sourcing large volumes of AAM that do not contain any critical minerals such as graphite that are extracted, processed or recycled by foreign entities of concern (FEOC).

This aims to maximise the number of batteries and EVs that can qualify for the critical mineral component of the US government’s Section 30D credit.

FEOC includes entities incorporated, headquartered or performing activities in covered nations such as China and entities outside of covered nations with a 25% or more board representation, voting rights or look-through equity interests with governments of FEOC-covered nations (including China).

If any step in the production of natural graphite AAM – from extraction to final processing into high purity material in the cell – is completed by a FEOC, it is deemed to be non-compliant and any EVs using it in their battery will from 1 January 2025 be disqualified from the Section 30D credit.

Accordingly, ex-China and non-FEOC incumbent and new anode processing companies that are aiming to supply North American battery manufacturers and auto OEMs are highly focused on sourcing long-term ex-China natural graphite feedstock.

Sole major source

According to Syrah, Balama is the only major independent source of high quality, large volume supply alternatives to meet these requirements.

The offtake agreement with Posco is for up to 2 kilotonnes per month in the year following commissioning, and from 2kt to 5kt per month (24 to 60kt per annum) at the option of Posco Future M, with at least six months’ notice from the second year to the end of the term.

The agreement is for six years commencing upon notification from Posco Future M.