Syrah Resources shares take off on US graphite tariff announcement

Shares in graphite producer Syrah Resources Ltd (ASX: SYR) have taken off after the US Department of Commerce confirmed it would slap large tariffs on Chinese graphite exporters.

Syrah is part of lobby group, the North American Graphite Alliance, which had petitioned the US government to investigate whether Chinese graphite active anode material (AAM) producers were being subsidised by the Chinese government.

Syrah said in its ASX statement on Thursday that the Department of Commerce (DOC) had determined this was the case.

In its final determination, DOC confirmed that major Chinese battery and graphite AAM producers are “de facto” controlled by the Chinese government and therefore subject to the China-wide dumping rate. The antidumping and countervailing duty (AD/CVD) measures will apply to all natural and synthetic graphite AAM products and AAM contained in blended materials, components (e.g. anode slurries) and subassemblies (e.g. electrodes) imported into the United States from China.

Steep tariffs to be imposed

Syrah said the DOC set a China-wide dumping margin of 102.72% and a dumping margin of 93.5% for certain exporters to counter dumping.

The company said the decision needed to be ratified by the US International Trade Commission (ITC) and once this was done, likely in March, the duties would be in place for five years.

These duties are separate from, and additive to, other existing or potential US import tariffs on Chinese natural graphite and synthetic graphite AAM, including tariffs imposed under Section 301, Section 232 and other reciprocal or IEEPA-related measures.

Syrah said the new tariffs would be positive for its business.

If affirmed by ITC, the AD/CVD measures are expected to support a fair and competitive AAM market in the United States and materially improve Syrah’s competitive position. This may lead to earlier commencement of AAM sales from the Vidalia facility, increased demand for Vidalia AAM, increased demand for Balama natural graphite as feedstock for non-integrated AAM facilities outside China, and improved commercial outcomes with customers for Syrah.

Syrah last month reported that production from its Balama graphite mine was 34% higher than the previous quarter, coming in at 34,400 tonnes.

Shares looking cheap

The analysts at Jarden had a look at the results at the time and said the company’s ownership of key assets in the critical minerals supply chain put it in a good position.

They went on to say:

Our base case and 12-month target price is unchanged at $0.34 per share, and remains set in line with our most conservative valuation scenario outcome. Syrah controls unique assets that are highly strategic within a critical mineral supply chain. We maintain our Overweight rating accordingly. Key risks to the downside include an extended period of depressed pricing for graphite products and the potential for further equity dilution to maintain liquidity.

Syrah shares were 8.5% higher at 25.5 cents on Thursday, well below the Jarden price target of 34 cents.

The post Syrah Resources shares take off on US graphite tariff announcement appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.