China, the world’s leading producer of graphite, controls exports of key battery materials

BEIJING, Oct 20 (Reuters) – China said on Friday it needed export permits for some graphite products to protect national security, in its latest move to curb supplies of the critical mineral in response to challenges to its global production dominance.

China is the world’s top producer and exporter of graphite. It refines more than 90% of the world’s graphite, which is used in nearly all EV battery anodes, the negatively charged part of a battery.

Beijing requires the export permits at a time when many foreign governments are increasing their pressure on the industrial practices of Chinese companies.

The European Union is weighing tariffs on Chinese-made EVs, arguing that they unfairly benefit from subsidies. Also, the U.S. government earlier this week expanded access to semiconductors by Chinese companies, including halting sales of advanced artificial intelligence chips made by Nvidia.

China’s Ministry of Commerce said the move was “conducive to ensuring the safety and stability of the global supply chain and industrial chain, and better safeguarding national security and interests.”

It also said it was not targeting any specific country. According to Chinese customs data, the top buyers of graphite from China include Japan, the United States, India and South Korea.

Under the new regulations, Dec. 1 Exporters must apply for permission to ship two types of graphite, including high-purity, high-hardness and high-intensity synthetic graphite material and natural flake graphite and its products.

The commerce ministry said three types of “highly sensitive” graphite materials were already under temporary restrictions and were added to the new list.

Meanwhile, it dropped temporary restrictions on five less sensitive graphite materials used in basic industries such as steel, metals and chemicals.

As sales of electric vehicles soar, automakers are scrambling to bring in supplies from outside China, but shortages remain.

“With this new graphite export ban, South Korean companies that rely heavily on China for graphite imports will have to look for alternatives such as mines from the US or Australia, but this will increase the cost burden for many,” said Kang Dong. -Jin, analyst at Hyundai Motor Securities.

Japan’s top government spokesman Hirokazu Matsuno said on Friday that he plans to ask China about the “operational principles” of the new measures and will “take appropriate measures” if they violate World Trade Organization rules.

Shares in China’s new energy vehicle and battery makers rose after the announcement.

Similar obstacles

Gallium and germanium, two chip-making metals, have the same restrictions in place as of August 1. Restrictions have recently reduced exports of those metals and raised prices outside the country.

Analysts said it was unclear how much of an impact Graphite’s new measures would have in the short term.

“This restriction is not a complete ban, and none of the industries were significantly affected during the previous temporary restriction,” said Evan Lam, senior analyst at Counterpoint Research.

Prices of natural flake graphite this week hit 3,950 yuan ($539.62) per metric ton, down 25.5% from the start of the year, according to Mysteel.

However, Rystat Energy analyst Echo Ma said exports will pick up ahead of Dec. 1, particularly to countries with established battery industries such as Japan, South Korea and the United States.

“We believe the average price of graphite will continue to rise in the near future due to supply and demand imbalances, including Russia, which was one of the main graphite suppliers before the Russia-Ukraine war,” said Counterpoint’s Lam.

China has reduced natural graphite mining in recent years to protect the environment, instead ramping up synthetic graphite production from 2021. MySteel advises that 70% of China’s production is now synthetic.

($1 = 7.3200 Chinese Yuan Renminbi)

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