ASX graphite shares have received increasing attention as the global energy transition picks up pace.
You may be more familiar with graphite in pencils. But it's the metal's ability to increase energy density in batteries and decrease charging times that's drawn ASX investor interest.
The federal government lists graphite as a critical mineral because it's "essential for the functioning of our modern technologies, economies or national security, and there is a risk that its supply chains could be disrupted".
As it stands, China is responsible for some 60% of global graphite production.
But with a range of ASX graphite shares to consider, which one stands out?
According to global resources portfolio manager at Ausbil Investment Management Luke Smith, that company is Syrah Resources Ltd (ASX: SYR).
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Not all graphite companies are created equal
Speaking to Livewire, Smith highlighted graphite's critical role in the energy transition. "But not all graphite companies are created equal," he said.
When it comes to ASX graphite shares, Smith said Ausbil prefers natural graphite:
Its main competitor in the space is synthetic graphite. You've seen energy costs go through the roof. That's limiting output. You've seen petroleum products go through the roof, that feeds into the production of synthetic graphite as well. And that's placing upward pressure on pricing within the graphite space.
Drilling into why Syrah is his preferred ASX graphite share, Smith said:
Syrah used to be the market darling a number of years ago… [They] created a mine, have approvals, have gone through the approval process in terms of selling into the battery supply chain. That process takes years.
They've got a major mine that's producing below nameplate, and ultimately is going to be feeding into this higher price environment, and ultimately we'll continue to see a re-rate of that story, from our perspective.
Nameplate, if you're not familiar, refers to a mine's full production capacity.
Syrah Resources share price snapshot
Over the past 12 months, the Syrah Resources share price is up 22%, handily outpacing the 10% full-year loss posted by the All Ordinaries Index (ASX: XAO).
The ASX graphite share has struggled in 2022, though, down 30% year-to-date.
