In a recent development, China, the world’s leading graphite producer and exporter, has announced new export restrictions on certain types of natural and man-made graphite. Effective from December 1, these regulations will require permits for the export of graphite, impacting the global electric vehicle (EV) battery industry.
Graphite is an essential component in nearly all EV battery anodes, serving as the negatively charged portion of the battery. As a result, the new export curbs have raised concerns among graphite consumers worldwide. Analysts anticipate a surge in imports from China throughout November as companies seek to secure their graphite supply before the new regulations take effect.
Tom Burkett, an expert at consultancy Global Graphite Advisory LCC, stated, “I expect we will see a surge in November of both buying and prices.”
This move is expected to have a significant impact on existing graphite producers in Canada and Africa, benefiting from increased demand. Furthermore, new graphite producers in Australia, Brazil, Africa, Canada, and the United States are likely to experience a fresh wave of investment to expedite production.
These export restrictions on graphite are reminiscent of the curbs imposed on two chip-making metals, gallium and germanium, since August 1. The initial announcement led to a boost in China’s exports in July as global buyers rushed to secure their supply. However, the subsequent launch of restrictions saw a sharp decline in exports during August and September.
James Willoughby at Wood Mackenzie noted that companies are now in the process of obtaining licenses for gallium and germanium, suggesting a potential gradual recovery in their exports. A similar scenario is expected for graphite, with an initial slowdown followed by a gradual restart.
China plays a pivotal role in global graphite production, contributing two-thirds of the natural graphite and dominating the synthetic version. It also accounts for over 90% of the final processed material used in EV battery anodes.
Major buyers of graphite from China include Japan, the United States, South Korea, and India. Daisy Jennings-Gray at Benchmark Mineral Intelligence mentioned that some anode manufacturers in Japan and South Korea may consider increasing their purchases of spherical graphite from China in the near term. This move stems from concerns that export licensing applications may face delays or even rejections.
However, some battery manufacturers might encounter challenges in sourcing graphite on a short-term basis. This is due to the extensive safety testing required for the graphite used in each model of electric vehicles, which can take up to three years. James Willoughby cautioned, “In the event of a worst-case scenario… it may be challenging to panic buy. There may not be material that matches exact needs available on a spot basis.”
China’s decision to impose export curbs on graphite comes as domestic demand for graphite products has increased significantly in recent years. John Meyer at SP Angel noted, “Having overproduced synthetic graphite, we reckon China is also keen to keep this material within China to meet rapid growth in EV battery demand.”
In response to this, U.S. and European companies have been investing in developing synthetic graphite as the demand from the EV sector for this soft form of carbon has surged. What was traditionally used for steelmaking refractories is now a sought-after material in the EV battery industry.
In essence, China’s new export restrictions on graphite are a strategic measure aimed at controlling the outflow of materials and safeguarding Chinese interests. It adds an extra layer of regulation to manage the export market and ensure the nation’s resources meet the growing demands of the EV battery industry.
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