By M. Marin
NASDAQ:NVX
READ THE FULL NVX RESEARCH REPORT
SECOND RECENT SALE OF NONCORE ASSETS
Divestiture of noncore businesses underscores prioritizing & enables focus on synthetic graphite
Novonix (NASDAQ:NVX) is building a North American vertically integrated synthetic graphite supply chain in North America. This week, the company announced that it has entered into a binding term sheet for the proposed sale of its NOVONIX Battery Technology Solutions (BTS) unit in Canada, with former CEO Dr. Chris Burns. Separately, the company believes the U.S. Department of Commerce decision regarding tariffs on material imported into the U.S. from China (see below) strengthens its competitive position for the North American market.
BTS is not a core business for the company, which is focusing on development of its synthetic graphite business. BTS provides advanced battery testing systems. The planned divestiture is also consistent with the recent sale of another noncore business, the Mt. Dromedary natural graphite mining project. We view these initiatives positively as they underscore, in our view, NVX’s prioritizing its synthetic graphite development and the sale of noncore assets, will enable the company to focus on and allocate capital to synthetic graphite.
Believe importance of local source of materials, reduced reliance on China highlighted by recent Depart. of Commerce intended action
We also believe the importance of creating a local source of such materials and reducing reliance on other countries is highlighted by recent regulatory measures. Earlier this month, the U.S. Department of Commerce issued its final determination regarding antidumping and countervailing duty investigations covering anode active materials (AAM) imported into the U.S. from China. Subject to a final determination by the U.S. International Trade Commission, expected in March 2026, that the U.S. AAM industry has been materially impeded because of Chinese AAM imports, the total amount of the tariffs applicable to AAM imported from China will be at least 160%.
If the ITC affirms, then an antidumping duty of 93.5% will be imposed on AAM imports from China from specified companies and a duty of 102.72% will be imposed China-wide on all other exporters. A countervailing duty of 66.82% to 66.86% will be imposed on all AAM imports from China producers. The duties apply to anode-graphite materials, including synthetic and natural graphite products and blended materials used in lithium-ion battery applications.
Synthetic graphite is a designated U.S. Critical Mineral, and NVX’s patented production technologies have been shown to be more energy-efficient and environmentally responsible compared to Chinese product, which represents the majority of production currently. 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.
The Department of Commerce determination follows the December 2024 petition for tariffs by the American Active Anode Material Producers (AAAMP), which includes NVX, alleging 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.
Company progressing toward commercial-scale production at Riverside facility
NVX continues to progress toward commercial-scale production at its Riverside facility in Chattanooga, Tennessee. The facility is on track to become the first large-scale synthetic graphite manufacturing plant in North America, according to NVX. In late 2025, NVX delivered its first mass production, commercial-grade sample of synthetic graphite for industrial applications to one of North America's largest value-added carbon processors with a global market reach. NVX provided an industrial-grade mass production sample for final qualification for use in various industrial applications. Industrial-grade product qualification enables a quicker roadmap to market than battery-grade synthetic graphite, according to the company. If/ when the two form a definitive supply agreement after final product qualification has been completed, target supply volumes will be further defined.
The company believes this delivery represents a milestone and demonstrates that its proprietary continuous graphitization furnace technology can be used to produce industrial-grade products at a mass production scale. Moreover, the capability to provide materials to markets outside the battery space is expected to enable NVX to diversify its product portfolio and allocate Riverside production.
Last month, NVX updated the expected timeline to begin mass production for Panasonic, its lead battery material customer. With four graphitization furnaces fully installed, all of the mass production equipment for Panasonic has been installed and commissioned. At this point, NVX is advancing through the final stages of battery-grade material qualification. Furnace calibration and raw material testing to support large-scale production are in process. Mass production of battery-grade anode material for Panasonic is expected to begin in 2H 2027.
Novonix continues to supply samples of synthetic graphite material to different prospective customers
Novonix has signed binding offtake agreements to supply synthetic graphite to Panasonic and PowerCo. Another offtake agreement with Stellantis was terminated last quarter. The company indicated that they did not reach an agreement on the unique battery cell product specifications and milestones for mass production qualification. Stellantis terminated multiple supply agreements for battery materials with different partners at the time.
Novonix continues to supply samples of synthetic graphite material to different prospective customers for their evaluation for battery and industrial applications. NVX expects to close additional agreements. The company provided more than 100 samples of synthetic graphite material to 15 customers and potential customers In 2025 for their battery, energy storage, and industrial applications. On the batteries side, there are multiple factors driving growing need for battery materials, including rising consumer adoption of electric vehicles (EVs) and installations of electric storage systems (ESS), among others. Novonix believes it has first mover advantage as an early manufacturer of synthetic graphite in North America.
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