By M. Marin
READ THE FULL NVX RESEARCH REPORT
Tariffs highlight need for North American supply chain for critical materials including Anode
We believe the positive outlook for Novonix (NASDAQ:NVX) is supported by recent government measures. NVX is a leading battery materials and technology company contributing to the development of a North American supply chain to support sustainable energy sources. According to Energy Storage News, the U.S. Department of Commerce provisionally has decided to impose 93.5% anti-dumping (AD) tariffs on active anode material (AAM) imports from China, which brings the total tariff on Chinese AAM imports to 160%. A final ruling is due on December 5, 2025, by which time the tariff rate could change.
The American Active Anode Material Producers (AAAMP), which includes NVX, had petitioned for tariffs in December 2024. The AAAMP alleged that Chinese manufacturers were receiving government subsidies enabling them to sell at reduced prices in order to retain their dominant industry position. On January 8, 2025, the U.S. Department of Commerce initiated antidumping duty (AD) and countervailing duty (CVD) investigations of active anode material from China. The trade publication notes that the provisional tariff ruling potentially impacts Tesla, Panasonic, SK On, and Samsung SDI, among other key customers for these products.
NVX views the provisional change, which impacts synthetic and natural graphite imports from China, as a positive, noting that it believes it “underscores the strategic importance of building a domestic supply chain for critical minerals, including synthetic graphite, in North America.”
We believe the tariff and trade backdrop also highlights the importance of reducing reliance on other countries for critical materials. Currently, manufacturers in China produce about 65% to 80% of the world’s graphite, according to the U.S. Geological Survey and United States Trade Representative (USTR). China accounts for roughly 79% of global production of synthetic anode material and an estimated 80+% of the market for automotive battery anodes, implying potential risks, we believe, that could lead to supply side disruptions. Export controls from China also highlight the need for local supply sources, in our view. In 4Q23, China imposed export controls for graphite. NVX expects its material can be a more reliable supply and more competitively priced.
New funding enhances liquidity…
We believe the expected increased need in North America for critical materials, including anode, is a key factor behind the non-dilutive funding the company has been able to obtain from the DOE, Canada Industrial Research Assistance Program and other sources. In addition, NVX has also secured additional liquidity, recently entering into a funding agreement for up to US$100 million convertible debentures with Yorkville Advisors Global.
… as NVX advances construction of second production plant
Production capacity of its existing Riverside plant has been pre-sold via multiple offtake agreements. These include key players such as Panasonic Energy, Stellantis, and PowerCo. In the aggregate, the company has allocated all the volume of the initial production capacity at the Riverside facility. With the commitment from Stellantis, which has become the company’s largest customer, NVX has secured upfront demand for all available initial volumes at the Riverside plant, plus a portion of volume to be produced at a planned greenfield plant. NVX plans to construct a 2nd facility in the state, recently obtaining approval and expected tax credits toward this project. Moreover, in 1H25, the company supplied samples of synthetic graphite material to 13 different customers and potential customers for their evaluation.
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