Investors are obsessed with ASX lithium shares, but what about this other critical battery metal?

Why is this material important for the creation of batteries in EVs?

| More on:
Two miners dressed in hard hats and high vis gear standing at an outdoor mining site discussing a mineral find with one holding a rock and the other looking at a tablet.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • ASX lithium shares have been on a hot run due to the transition to electric vehicles
  • However, there is a different metal that's also used in the creation of batteries for EVs
  • This metal could trade at a premium in the future according to some brokers and analysts

ASX lithium shares are surging to new heights amid the world's transition to electric vehicles. Some companies, such as Latin Resources Ltd (ASX: LRS), are up as much as 300% year to date.

One downside of the share price increases for lithium shares is that latecomers to the investing party could view them as suspiciously overvalued. After all, no company's shares can keep going parabolic forever.

There is a different battery metal that goes hand in hand with lithium. Let's investigate the material, the companies that produce it, and how it stacks up with lithium moving forward.

Graphite challenges ASX lithium shares for the spotlight

According to analysts from Credit Suisse, graphite is another battery material with excellent prospects, as reported by The Age in April.

The analysts said:

It looks a lot more like lithium three to five years ago.

In five years' time, suddenly graphite pricing will have gone up in my view quite significantly, and it will bring a huge incentive to bring all these projects on board.

The Age published additional analysis on graphite last Saturday, this time with Ausbil portfolio manager James Stewart stating that:

EVs underpin long-term growth for nickel and copper, but here and now, we see very tight markets in graphite and lithium, as mine development has not kept pace with surging demand with this one-time fundamental switch from fossil fuels to renewables.

Stewart continued:

Lithium and graphite pricing is expected to remain elevated for some time, and we believe we will benefit from owing [sic] the lithium and graphite producers and developers.

So, according to analysts, graphite arguably has the same outlook as lithium. Both also benefit from a surge of interest on the demand front, while on the supply end, producers can't ship the material fast enough to keep up with expected orders.

Aside from this, graphite is also a critical component in creating lithium batteries. One lithium battery in an electric vehicle comprises around 20% graphite.

Companies involved in graphite production

The following companies are in the graphite production space, for investors looking for an alternative to ASX lithium shares.

Sayona Mining Ltd (ASX: SYA) is a mineral explorer with an interest in discovering lithium and graphite. In Australia's northern region, graphite mineralisation was reported in the East Kimberley site. Shares are up 157.14% year to date.

Syrah Resources Ltd (ASX: SYR) was named "the biggest graphite producer on the ASX" by a broker in September. Shares are down 2.59% year to date.

Argosy Minerals Limited (ASX: AGY) has a graphite project located in Namibia. The company has "not made any final decision on its strategy for the project, pending further review and considering funding opportunities". Shares are up 48.48% year to date.

Magnis Energy Technologies Ltd (ASX: MNS) owns the Nachu graphite project in Ruangwa, Tanzania. Shares are down 14.04% year to date.

Motley Fool contributor Matthew Farley 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.

More on Materials Shares

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

'I hate what I have done': Mineral Resources share price down as Ellison laments actions

Managing Director Chris Ellison says he deeply regrets the impact of his 'error of judgement'.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Materials Shares

Why is this ASX lithium stock jumping to a 52-week high today?

This lithium stock is smashing the market this year despite all the doom and gloom in the industry.

Read more »

Projection of two hands being shaken on a deal.
Materials Shares

Sayona Mining shares sink 13% on Piedmont Lithium merger news and capital raise

This merger will create the largest lithium producer in North America.

Read more »

Miner looking at a tablet.
Materials Shares

Down 28% in 2024, why this ASX 200 lithium stock could now be 'deeply undervalued'

The ASX 200 lithium stock has drawn plenty of investor attention over the past month.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Materials Shares

Buy BHP shares for a 20%+ return

Goldman Sachs expects big total returns from this mining giant.

Read more »

Miner looking at a tablet.
Materials Shares

Here's why ASX uranium shares are ripping higher today

Uranium shares are smashing the markets today.

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Materials Shares

2 ASX 200 lithium stocks to buy for big returns

Which stocks are analysts tipping as buys right now? Let's find out.

Read more »

Young businesswoman sitting in kitchen and working on laptop.
Materials Shares

Is Mineral Resources stock a good buy right now?

This mining share is trading close to multi-year lows. Is this a buying opportunity? Let's find out.

Read more »