Analysts Skeptical About Sustainability of Graphite Boom

Reuters reported analysts’ concerns that like the rare earth boom from two years ago, graphite company shares have soared to potentially unsustainable highs.

As quoted in the market news:

Prices rose last year in part on concerns that China, which produces some 70 percent of global supply, will choke off exports much as it did with the rare earths. Meanwhile, demand for graphite is expected to surge. That’s a tempting imbalance that many investors might find hard to resist.

But experts say concerns over China are overblown. In contrast to rare earths, there are plenty of alternative sources of graphite around the world. Indeed, only 51 percent of natural graphite imported into the United States from 2007 to 2010 came from China, with nearly 40 percent coming from Canada and Mexico, according to the U.S. Geological Survey.

Chief executive of Asbury Carbon, Stephen Riddle, commented:

In a three-month period we had prices double, just that quickly. It’s kind of like how the stock market works – it was on perceived future demand.

Matt Gowing, a Mackie Research analyst cautioned investors:

It comes down to people having to be very judicious on companies and projects. There’s only going to be room for a limited number of players.

To read the full Reuters report, click here.