It is interesting looking back at China’s motives for...

It is interesting looking back at China’s motives for introducing the export controls in December last year.

"The new measures will ensure the domestic supply of graphite for military use, such as in the aerospace sector, as well as domestic battery-making," Chang Ke, an analyst at consultancy Mysteel, told Reuters. (Euronews)

We know that China will use its control of critical minerals to punish countries in retaliation. They effectively banned graphite exports for battery anodes to Sweden for about three years from early 2020.

“One company was told that licences to export graphite to Sweden were no longer being issued by Chinese regulators.” (The Economist)

Where does the US import its graphite from?

“One-third of its graphite imports come from China. And it has few close allies among the alternative countries at the moment.” (Euronews)

The US recognises the supply risk.

“Graphite is one of nine listed minerals meeting all six of the industrial/defense sector indicators identified by the US government report. In 2021, President Joe Biden signed an executive order aimed at strengthening critical US supply chains. Graphite was identified as one of four minerals considered essential to the nation’s ‘national security, foreign policy and economy’.” (Mining.com)

So why did the US introduce tariffs on natural graphite?

“Beginning in 2026 the US will apply a tariff of 25% on Chinese natural graphite imports, a move aimed at reining in China’s near-monopoly … and shows that it intends to diversify anode supplies away from China. The tariffs are likely to accelerate the ex-China natural graphite build out that has emerged in recent years.” (Benchmark Source)

With natural graphite expected to enter sustained deficit in the coming years and escalating trade tensions with China, it appears the scramble to secure ex-China graphite supply is on.

“The move highlights the significant leverage China has with regard to critical materials, as well as the potential ramifications of escalating trade tensions. Not only could material restrictions on graphite exports disrupt the rapid deployment of electric vehicles and thereby undermine decarbonization efforts, the impact could be felt more broadly, given the use of graphite in a range of applications, including advanced semiconductors. Ultimately China’s approach allows for a great deal of flexibility while maintaining an effective hold on high-grade graphite supply that can be tightened or loosened at will.” (FTI Consulting)

https://www.euronews.com/business/2023/10/20/red-alert-for-the-ev-market-china-puts-curb-on-graphite-export

https://www.economist.com/business/2023/06/22/why-is-china-blocking-graphite-exports-to-sweden

https://www.mining.com/graphites-war-fighting-capabilities/

https://source.benchmarkminerals.com/article/us-hikes-tariffs-to-further-isolate-china-from-its-ev-supply-chain-ambitions

https://www.fticonsulting.com/insights/articles/chinas-export-controls-critical-minerals-gallium-germanium-graphite