China Puts Export Curbs on Graphite

China will require export permits for some graphite products to protect national security, its commerce ministry said on Friday, in its latest move to control supplies of critical minerals in response to challenges over its manufacturing dominance.

China is the world’s top graphite producer and exporter and also refines more than 90 per cent of the world’s graphite into the material that is used in virtually all EV battery anodes, which is the negatively charged portion of a battery.

A Chinese EV factory: graphite is a key component in electric-vehicle batteries. Bloomberg

Beijing is requiring the export permits at a time when many foreign governments are increasing their pressure on Chinese companies over their industrial practices.

The European Union is weighing levying tariffs on Chinese-made EVs, arguing they unfairly benefit from subsidies. Also, the US government earlier this week widened curbs on Chinese companies’ access to semiconductors, including stopping sales of more advanced artificial intelligence chips made by Nvidia.

The ministry said the move was “conducive to ensuring the security and stability of the global supply chain and industrial chain, and conducive to better safeguarding national security and interests”.

It added that it was not targeting any specific country. Top buyers of graphite from China include Japan, the United States, India and South Korea, according to Chinese customs data.

Under the new restrictions, China will require as of December 1 that exporters apply for permits to ship two types of graphite, including high-purity, high-hardness and high intensity synthetic graphite material, and natural flake graphite and its products.

Domestic supply

Three types of “highly sensitive” graphite items had already been under temporary controls, the commerce ministry said, and were included in the new list.

Meanwhile, it dropped temporary controls on five less sensitive graphite items used in basic industries such as steel, metallurgy, and chemicals.

The new measures will ensure the domestic supply of graphite for military use, such as in the aerospace sector, as well as domestic battery-making, said Chang Ke, an analyst at consultancy Mysteel.

With rising sales of electric vehicles, car makers are racing to lock in supplies from outside China, but shortages are looming.

“It’s a restriction on EV material flowing out as many new energy companies are increasingly building up more plants overseas,” Mr Chang said.

Shares in China’s new energy vehicle and battery makers rose after the announcement.

The curbs are similar to those in place since August 1 for two chip-making metals, gallium and germanium. The restrictions have slashed exports of those metals from China recently and pushed up prices outside the country.

Analysts said it was not clear how much impact the new measures on graphite would have in the short term.

“This control is not a complete ban, and there has been no significant impact on any industry during the previous temporary control,” said Ivan Lam, a senior analyst at Counterpoint Research.

Prices for natural flake graphite were 3950 yuan ($855) a metric ton this week, down 25.5 per cent from the beginning of this year because of declining demand from the EV sector, according to Mysteel.

However, Counterpoint’s Lam said that graphite prices are likely to rise.

“We believe that the average price of graphite will continue to rise in the future due to supply and demand imbalances, including Russia, which was one of the major graphite suppliers before the Russia-Ukraine war,” he said.

China has reduced natural graphite mining in recent years to protect the environment, instead ramping up synthetic graphite output since 2021. The synthetic form now accounts for 70 per cent of China’s output, according to Mysteel.

October 20, 2023