China has revealed its intentions to curtail the exports of graphite, an essential mineral in the production of batteries for electric vehicles (EVs). The Ministry of Commerce and the General Administration of Customs made this announcement, emphasizing national security as the primary reason for this decision.
This development emerges shortly after the U.S. introduced further restrictions on the types of semiconductors that American firms can trade with Chinese entities. Stefan Legge, the head of tax and trade policy research at the University of St Gallen in Switzerland, commented on the situation, noting the escalating protectionist measures between China and Western nations. He highlighted the economic implications when geopolitics overshadows economic interests.
China holds a significant position in the global production and processing of graphite. Starting in December, the country will require export permits for specific types of synthetic graphite material, including high-purity, high-strength, and high-density variants, as well as for natural flake graphite.
The Institute for Energy Research, based in Washington, DC, has pointed out that automobile manufacturers are actively seeking graphite supplies outside of China, given the surging demand for EV batteries. Global EV sales, encompassing both battery-only and hybrid vehicles, have been on the rise. Sales surpassed 10 million units in the previous year, marking a 55% increase from 2021, with projections estimating nearly 14 million vehicles sold this year.
The U.S. Geological Survey reports that the graphite market for battery usage has expanded by 250% worldwide since 2018. China was the leading graphite producer in the past year, contributing to approximately 65% of the global production.
Graphite finds applications in various industries, including semiconductor, aerospace, chemical, and steel sectors.
China’s decision to curb exports comes amidst mounting international pressure concerning its trade and commercial practices. The nation has been engaged in a tech conflict with the U.S. and its European and Asian allies over access to advanced chips and chip-making equipment. Earlier in July, China had restricted the export of gallium and germanium, essential minerals for semiconductor production.
Ivan Lam, a senior analyst at Counterpoint Research, mentioned that China had previously implemented temporary export controls on graphite with minimal industry impact. However, he anticipates a rise in graphite prices due to supply-demand imbalances, especially considering Russia’s previous role as a significant graphite supplier before the Russia-Ukraine conflict.
China’s dominance in the global supply chain of critical minerals essential for EV batteries is evident. The country refines 60% of the world’s lithium and 80% of its cobalt, as per the U.S. Department of Energy.