Top Producer of Graphite in The World, China, is Limiting Exports of Essential Battery Material

China surprised everyone on Friday by announcing that it will need export permits for certain graphite products in order to safeguard national security.

China is the world’s largest producer and exporter of graphite. Additionally, it refines over 90% of the world’s graphite to produce the substance used in almost all electric vehicle anodes, or the negatively charged parts of batteries.

Kien Huynh, chief commercial officer at Alkemy Capital Investments said “This bold and unexpected move by China in graphite has taken us by surprise, arriving far sooner than anyone could have predicted,” 

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

The European Union claims Chinese-made electric vehicles (EVs) unfairly receive subsidies, so EU is considering imposing tariffs on them. Additionally, earlier this week, the U.S. government tightened restrictions on Chinese companies’ access to semiconductors, halting the sale of Nvidia’s more sophisticated artificial intelligence chips.

Northern Graphite (NGC.V) CEO Hugues Jacquemin said “What China is saying to the West with this decision is that we are not going to help you make electric cars, you have to find your own way to do that,”

China’s commerce ministry said the move on graphite 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”.

The short-term impact of the new measures on graphite is unclear, according to analysts.

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

Due to dwindling demand from the EV sector, prices for natural flake graphite were 3,950 yuan ($539.62) per metric ton this week, down 25.5% from the start of the year, according to consultancy Mysteel.

Tom Kavanagh, head of battery metals at commodity and energy pricing agency Argus said “This action could set them on an upward trajectory internationally, while keeping domestic prices low for Chinese battery producers,” 

Reference : 

Liu, S., & Patton, D. (2023, October 20). China, world’s top graphite producer, tightens exports of key battery material. Reuters.