Beijing's recent move to impose export restrictions on graphite has raised significant concerns within the global electric vehicle (EV) battery supply chain. While China has stated that these restrictions are not specific to any particular sector, industry experts and insiders have highlighted potential challenges, especially for foreign manufacturers of EV battery components who have not yet shifted to using as much synthetic material as their Chinese counterparts.
China holds a dominant position in the global EV battery supply chain, including the production of graphite, a critical component. Chinese companies process both natural graphite, sourced domestically and internationally, as well as synthetic forms of the mineral.
Japan, South Korea, and the United States are major buyers of both natural and synthetic Chinese graphite. Analysts have cautioned that the new measures could disrupt or reduce the supply of graphite needed by companies in these countries to produce anodes—the negative electrodes of EV batteries.
Starting from December 1, China will require export permits for high-end synthetic graphite and key forms of natural graphite under the new rules.
Several executives from companies both in China and globally that utilize graphite in their production processes have expressed a need for further clarity regarding these measures.
While some Chinese manufacturers, including those with overseas operations, anticipate limited impacts on their operations due to the predominant use of a synthetic material grade unaffected by the export restrictions, concerns remain. For instance, some companies export spherical graphite—a crucial component used in lithium-ion battery anodes—to South Korea and Japan and anticipate increased inconvenience in the exporting process.
China's recent requirement for export permits for gallium and germanium products has already disrupted international shipments of these metals. Moreover, graphite's use in military equipment has added another layer of complexity to the situation.
Foreign manufacturers have been slower in transitioning from natural to synthetic graphite due to production challenges associated with synthetic graphite and the cost advantages of natural graphite anodes. However, Chinese companies have continued to build overseas plants, using synthetic graphite with densities below the threshold covered by the new measures. This synthetic graphite allows for faster battery charging.
Companies such as Gotion High Tech, backed by Volkswagen, and BTR New Material Technology have clarified that the density of graphite used in their batteries remains unaffected by the restrictions. Similarly, Ningbo Shanshan, another leading Chinese anode maker, has reported that the restrictions will not impact its exports of artificial graphite products.
On the other hand, global companies like Hitachi Chemical, POSCO Future M, and Mitsubishi Chemical, which rely on natural graphite, may face challenges due to the restrictions. Australia-based Tesla supplier Syrah Resources expects increased purchases of natural graphite from outside of China as a response to the stricter controls.
Epsilon Advanced Materials (EAM) in India plans to open a plant in the U.S. state of North Carolina for battery materials and components, including synthetic graphite. EAM CEO Sunit Kapur emphasized the importance of developing synthetic graphite locally in the U.S. due to the potential limitations and price increases associated with graphite exports from China.
The global EV battery supply chain remains watchful and adaptable as it navigates these shifting dynamics in the graphite market.