HomeEconomic IndicatorChina, leading global graphite producer, restricts exports of crucial battery material, per...

China, leading global graphite producer, restricts exports of crucial battery material, per Reuters report.

China to Impose Export Permits for Graphite Products

China’s Move to Control Graphite Supplies

China has announced that it will require export permits for certain graphite products in order to protect national security. This decision comes as part of China’s efforts to control the supply of critical minerals and maintain its dominance in global manufacturing. As the world’s top graphite producer and exporter, China plays a crucial role in refining graphite, a key material used in electric vehicle (EV) battery anodes. With foreign governments increasing pressure on Chinese companies over their industrial practices, Beijing’s move to impose export permits is seen as a response to these challenges.

Impact on the Global Supply Chain

The European Union is considering imposing tariffs on Chinese-made EVs, citing unfair subsidies. Additionally, the United States government recently expanded restrictions on Chinese companies’ access to semiconductors, including advanced artificial intelligence chips. China’s commerce ministry claims that these export permits will help secure the global supply chain, safeguard national security, and maintain stability. It is important to note that these restrictions are not specifically targeting any particular country, with top buyers of graphite from China including Japan, the United States, India, and South Korea.

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New Export Permit Requirements

Starting from December 1st, China will require exporters to apply for permits for two types of graphite products: high-purity, high-hardness, and high-intensity synthetic graphite material, as well as natural flake graphite and its products. The commerce ministry further explained that three “highly sensitive” graphite items were already under temporary controls and will be included in the new list. However, controls on five less sensitive graphite items used in basic industries such as steel, metallurgy, and chemicals will be lifted.

Consequences for the EV Industry

The demand for graphite has been increasing due to the rising sales of electric vehicles. Automakers are now seeking alternative sources of graphite to reduce their reliance on China. However, finding alternatives may increase costs for many companies. South Korean firms, for example, heavily rely on graphite imports from China and may need to seek alternative sources from the United States or Australia. Japan has expressed concerns and plans to discuss the operational policies of the new measures with China to ensure compliance with World Trading Organization rules.

Increasing Importance of Graphite

The announcement of these export permits has led to a rise in shares of China’s new energy vehicle and battery makers. Similar to the restrictions imposed on chip-making metals gallium and germanium, it remains to be seen how much impact these measures will have on the graphite market in the short term. While prices for natural flake graphite have declined this year due to declining demand from the EV sector, exports are expected to rise before December 1st, especially to countries with established battery industries such as Japan, South Korea, and the United States. The reduced mining of natural graphite in China has led to a greater focus on synthetic graphite production, which now accounts for 70% of China’s output.

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China’s decision to require export permits for graphite products is a significant development in its efforts to control critical mineral supplies. As countries around the world increase scrutiny of Chinese industrial practices, it is clear that China aims to maintain its global manufacturing dominance and safeguard its national security interests. The impact of these export permits remains to be seen, but they are likely to have implications for the EV industry and the global supply chain.

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