China will limit graphite exports – Vedomosti

The export of two types of graphite (synthetic and natural) and derivative materials from China will be prohibited from December 1, 2023 without a special license. National security interests were cited as justification for the decision, the Chinese publication The Global Times (Huanqiu Shibao) reported on October 20, citing a joint press release from the Ministry of Commerce and the General Administration of Customs of the People’s Republic of China.

According to the Institute for Energy Research (IER), China produces 61% of the world’s graphite and 98% of the ready-to-use material. According to Statista, 1.3 million tons of graphite were produced worldwide in 2022. The top five largest producers include China, Mozambique, Madagascar, Brazil and Russia. In 2022, 850,000 tons of graphite were produced in China, and 15,000 tons in Russia.

China also supplies the majority of the EU’s graphite imports. This is stated on the website of the European Carbon and Graphite Association (ECGA). According to the US Geological Survey (USGS), from 2018 to 2021. China’s share in American imports of natural graphite was 33%, the country was ahead of Mexico (18%), Canada (17%), Madagascar (10%) and others (22%). Neither the US nor the EU produces natural graphite on their territory.

According to the National Institutes of Health (NIH), 60 to 80% of synthetic graphite consumed in the United States was produced domestically. At the same time, the USGS recorded 10 deposits, either in which graphite was previously mined, or which could potentially become its source in the future.

Graphite is one of the main components of batteries, including for electric vehicles. According to Autoweek magazine, this mineral accounts for 25-28% of the materials used in batteries. According to Mining.com calculations, 1 million electric vehicles require 75,000 tons of graphite. In the production of lithium-ion batteries, graphite is used 15 times more than lithium. Anodes (about 95% graphite according to ECGA) for batteries can be constructed using natural and synthetic graphite. The latter is more expensive, but has a lower power output and is also less environmentally friendly.

As reported by Reuters, on October 20, against the backdrop of news about strengthening export controls, quotes of Chinese manufacturers of electric vehicles and batteries began to rise from their lowest levels in the last few years. The CSI New Energy Vehicles and CSI Battery (China) indices showed growth of 1.7% and 1.8%, respectively.

Previously, China has already limited the export of at least three types of graphite. Under those decisions, as now, it was assumed that potential exporters were required to obtain a license. Also, according to Bloomberg, there are cases in which, after adding new items to the list, some old ones were excluded from it.

Also in early July, China introduced similar restrictions on the export of gallium and germanium. The regime came into force on August 1.

After the restrictions begin, prices may begin to rise, while Chinese consumers will be able to buy graphite on the domestic market a little cheaper than others, says Oksana Lukicheva, leading analyst of the macroeconomic analysis department of FG Finam. The expert emphasized that China is gradually reducing the production of natural graphite and switching to the production of synthetic graphite. She also noted that consumers in South Korea and Japan could be hit the hardest.

“The main growth in demand and transfer of consumption technology will be in the field of synthetic graphite. Natural graphite production will remain stable for the foreseeable future. The production of synthetic graphite will increase, and demand will be met through it. It already accounts for about 50% of consumption, and the share will gradually increase to 70-80%,” concluded Lukicheva.

The advantage of China and, accordingly, the reason for North America’s dependence on it, is its good raw material base and streamlined technological process, explained the head of the analytical research department Alfa Bank Boris Krasnozhenov. The expert also noted that significant battery capacity is now being built in North America, which could encourage local businesses to produce their own graphite. For example, there are large deposits in Canada, but they need to be developed, and this takes time, Krasnozhenov concluded.

China has long been using export controls to put pressure on its opponents, said St. Petersburg State University professor Yana Leksyutina. “A well-known case is the restrictions imposed by China on the export of rare earth metals in 2010 in response to Japan’s unfriendly actions in the East China Sea. These restrictions were then extended to both the US and the EU, which led to a corresponding investigation within the WTO,” the expert explained.

According to Leksyutina, the current restrictions on graphite exports are Beijing’s response to manifestations of technological warfare on the part of the United States and its allies.

The confrontation between the United States and China in the field of high technology began to gradually manifest itself at the end of the Barack Obama administration (2009-2017). In December 2016, Obama blocked the Chinese acquisition of German chipmaker Aixitron by refusing to sell his stake. Under Donald Trump (2017-2021), the rivalry expanded to include most high-tech areas, including semiconductors, 5G, AI, quantum computing and cloud technologies.

The situation has remained virtually unchanged under Joseph Biden. In October 2022, he issued an executive order establishing a strict semiconductor export control regime. According to the document, any semiconductor made in the USA or even using American technology was prohibited from being supplied to China. The Biden administration’s latest major moves included an August decision to ban certain U.S. investments in the Chinese tech sector and an October 17 decision to block China’s access to Nvidia chips.