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.
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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.
