New US tariffs on China to boost Australian critical minerals sector: analysts
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The news: New US tariffs on China's critical minerals and electric vehicles (EVs) could pose major benefits for Australia's graphite developers, according to Macquarie analysts.
The numbers: The analysts said the tariff rate on certain steel and aluminium products will increase from 0% to 7.5%, to 25% in 2024, but they expect iron ore and coking coal prices to be driven by non-US factors given the country's relatively small market size.
Elsewhere, the tariff rate on natural graphite will increase from 0% to 25% in 2026, a tailwind that may directly increase prices for natural graphite.
There may be also secondary implications on the lithium and rare earths sector, according to the analysts, as the US tariff rate on China's EVs is set to rise from 25% to 100% in 2024, while lithium EV batteries will increase from 7.5% to 25%.
While this could be positive for non-China EV and battery markets, higher levies could be partially offset by productivity improvement at Chinese companies.
By midday trade on the ASX, the materials was the only sector in green gaining 0.31%.
The context: The Macquarie research found that local graphite companies would be the "clear winners" from the new US tariffs, with expectations that natural graphite prices will lift due to the new tax regime.
The analysts noted that Syrah Resources is well-placed to capture the earnings upside, while ASX rivals Talga Group, Black Rock Mining and Renascor Resources could be "minor winners" due to not yet being in production.
Piedmont Lithium, Sayona Mining and Lynas Rare Earths may also capitalise due to their producer status and strategic locations.
Meanwhile, Rio Tinto and South32 are expected to gain from the hiked tariff rate on aluminium, with Alcoa to also set to benefit after expanding its aluminium exposure following the completion of its Alumina acquisition in March.
The source: Macquarie research
