In a move that could impact the global electric vehicle (EV) battery industry, China, the world's leading producer and exporter of graphite, has announced new export restrictions set to take effect on December 1st. These restrictions will require permits for the export of certain types of natural and man-made graphite products. Graphite is a crucial component in EV battery anodes, making this development a matter of concern for various stakeholders in the sector.
Analysts predict a surge in demand and prices for graphite in November as some consumers rush to accelerate their imports from China before the export curbs come into play. Tom Burkett, a consultant at Global Graphite Advisory LCC, anticipates increased activity in the market during this period.
The restrictions, similar to those imposed on gallium and germanium since August 1st, have had a mixed impact on China's exports. While they initially boosted exports as overseas buyers scrambled to secure supplies, the subsequent enforcement of restrictions in August and September resulted in a significant drop in exports.
James Willoughby of Wood Mackenzie suggests that, like gallium and germanium, graphite may experience an initial slowdown followed by a gradual recovery as companies obtain the necessary licenses.
China plays a pivotal role in the global graphite market, producing two-thirds of the world's natural graphite and dominating synthetic graphite production. Furthermore, it manufactures over 90% of the final processed material used in EV battery anodes.
Key importers of graphite from China, including Japan, the United States, South Korea, and India, are closely monitoring the situation. Daisy Jennings-Gray of Benchmark Mineral Intelligence suggests that some anode manufacturers in Japan and South Korea may consider increasing their purchases of spherical graphite from China in the short term if they fear delays or denials in export licensing applications.
However, the situation may prove challenging for some battery manufacturers due to rigorous safety testing requirements for graphite used in EV models, which can take up to three years. Willoughby warns that panic buying might not be a feasible option, as there may not be spot-available material that precisely matches the required specifications.
China's decision to impose these export curbs aligns with the country's increasing domestic demand for graphite products, driven in part by the rapid growth of the EV battery industry. John Meyer of SP Angel suggests that China aims to retain more synthetic graphite within its borders to meet this rising demand.
In response to these developments, U.S. and European companies have been investing in the development of synthetic graphite, which is in high demand for EV applications. These measures are seen as a safeguard to protect Chinese interests by imposing an extra layer of control on the outflow of materials, effectively creating a quota system for exports.
As the December 1st deadline approaches, the global EV battery market watches closely, hoping for a smoother transition amid these new export restrictions that could shape the industry's landscape in the coming months.