Insider Tip On a Synthetic Graphite Stock

synthetic graphite

What do the raw materials cobalt, manganese, nickel, lithium and aluminum have in common? They are all components of lithium-ion batteries and thus basic materials for electromobility. But there is one battery raw material that many investors do not even have on their radar: graphite. You’re probably quite familiar with graphite from school – it’s the main component of pencil lead, after all. But synthetic graphite has far more exciting uses than that… 

Graphite: Not Just For Pencils

But first, some important background information for you: there is both natural and synthetic graphite. Natural graphite is a mining product and is obtained using conventional mining methods. Synthetic graphite is produced artificially using a coal-based process – for example, from lignite and hard coal.

The distinction is important – the two graphite variants are in principle two completely different raw materials. Each has their own established areas of application. Synthetic graphite, which is purer and used in more energy-intensive processes than pencil-making – is of interest to us as investors. 

Synthetic Graphite in Batteries

The electrodes of lithium ion batteries contain synthetic graphite. Experts estimate that around 1.1 kilograms of graphite is necessary per kilowatt hour (KWh) of battery capacity in modern electric cars. An average battery (90 KWh) therefore requires 99 kilograms of graphite.

Of course, even in its synthetic form, graphite is far from rare. Nevertheless, the USA declared it a critical raw material last year. The reason: as with other important materials, China controls it.

According to current data from the Federal Institute for Geosciences and Natural Resources, the People’s Republic is the most important producer. They have a global share of nearly 74% of natural graphite and 49% of synthetic graphite.

Accordingly, China could use its supremacy as political leverage and make it more difficult for Western countries or companies to gain access to the battery raw material.

SGL Carbon (OTC:SGLFF): The German Graphite Stock

All the more reason for Western companies to increase their output now in order to reduce their problematic dependence on China. As an investor, you can bet on this offensive. For example, with SGL Carbon shares.

The Wiesbaden-based group manufactures products made of carbon – including synthetic graphite. In the first nine months of 2021, the “Graphite Solutions” business unit accounted for about 44% of consolidated sales, making it SGL Carbon’s most important segment. Meanwhile, sales from the graphite business improved by 8%.

Profit with Graphite

Of particular interest to you: It is not only sales that have been on the upswing for the Business Area recently – SGL was also able to make a strong impact on profitability. The EBITDA of “Graphite Solutions” shot up by 36 percent to 67.5 million euros between January and the end of September.

Incidentally, the company earned 42.6 million euros at the bottom line – after a loss of just under 4 million euros in the same period of the previous year. SGL Carbon attributes its strong performance primarily to the enormous demand for graphite products for electric cars.

As the spread of electric cars is increasing at a rapid pace, the German group expects further increases in demand in the coming months and years and thus a flourishing graphite business.

Shares Still Have Room For Improvement

In recent weeks, however, the share price has tended to head south. This is in part because of the new Omicron variant of COVID-19, which is currently fueling economic fears.

This makes the stock all the more favorable at present. In the long term, at any rate, the share should benefit from the boom in electromobility. This is also the view of most analysts. According to Marketscreener, the share price potential is in the high single-digit percentage range. One drawback to consider as a U.S. investor, however – is its low volume – the stock is thinly-traded over-the-counter.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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