In a calculated maneuver that could have far-reaching implications, China has announced plans to restrict the exports of graphite, a critical mineral in the production of batteries for electric vehicles (EVs). The rationale behind this decision, according to China’s Ministry of Commerce and the General Administration of Customs, is rooted in national security concerns. This move comes hot on the heels of the United States imposing further limitations on the types of semiconductors American companies can sell to their Chinese counterparts. The world watches as this global tech war intensifies, highlighting the consequences of protectionist measures on a global scale.
The tension between China and Western nations in the realm of technology trade has reached a critical juncture. Stefan Legge, head of tax and trade policy research at the University of St. Gallen in Switzerland, aptly characterizes this situation as a “tit-for-tat” battle, invoking Newton’s third law: every action causes a reaction. Yet, beneath the surface, both sides understand the immense economic costs of allowing geopolitics to eclipse economics.
China, a global titan in the production and processing of graphite, has declared that starting in December, export permits will be mandatory for synthetic graphite materials, including high-purity, high-strength, and high-density versions, as well as natural flake graphite. This decision has been prompted by the surge in demand for EV batteries, which has led car manufacturers to seek alternative sources of graphite outside of China. According to the Institute for Energy Research in Washington, DC, global EV sales, including purely battery-powered vehicles and hybrids, skyrocketed by 55% in 2022, surpassing 10 million units and projected to approach 14 million this year. This burgeoning market has seen the demand for graphite used in batteries grow by a staggering 250% globally since 2018.
China’s dominance in the graphite industry is undeniable, with the nation accounting for approximately 65% of global graphite production in 2022, according to the US Geological Survey. However, the utility of graphite extends beyond EVs; it plays a vital role in the semiconductor, aerospace, chemical, and steel industries.
The imposition of export restrictions on graphite is not an isolated event but rather a strategic move in China’s ongoing battles over trade practices. Over the past year, China has been embroiled in a tech war with the United States and its allies in Europe and Asia, with the primary point of contention being access to advanced chips and chipmaking equipment. In July, Beijing imposed export restrictions on gallium and germanium, essential minerals for semiconductor production, causing overseas shipments of these materials to plummet to zero within a month.
Ivan Lam, a senior analyst at Counterpoint Research, noted that while China’s previous temporary export controls on graphite had little industry impact, the new rules represent a different scenario. Though not a “complete ban,” these restrictions are expected to drive up prices, creating a ripple effect across the global supply chain. Lam predicts that the average price of graphite will continue to rise due to supply and demand imbalances, exacerbated by geopolitical tensions, including the Russia-Ukraine conflict, which has disrupted major graphite suppliers.
China’s stranglehold on the supply chain of critical minerals needed for EV batteries is staggering. The nation currently refines 60% of the world’s lithium and 80% of the cobalt, according to the US Department of Energy. With this latest move to control graphite exports, China further solidifies its position as a dominant force in the global tech industry.
In response to China’s strategic actions, foreign governments are intensifying their pressure on Chinese companies over industrial practices. The European Union is considering imposing tariffs on Chinese-made EVs, alleging unfair subsidies, while the United States is expanding restrictions on Chinese companies’ access to semiconductors, including advanced artificial intelligence chips produced by Nvidia.
While new investments in the United States and Europe aim to challenge China’s monopoly on graphite, industry experts acknowledge that this will be an uphill battle. China’s key graphite buyers, including Japan, India, and South Korea, are closely monitoring the situation as global tech tensions continue to escalate. The world watches with bated breath as this intricate web of trade wars, technological advancements, and national interests plays out on the global stage.
China has been planning this for a long time. They have systematically purchased the mining and production for numerous rare earth minerals and have a substantial stranglehold on other materials like graphite and lithium as mentioned above. This is another instance where China has gained an advantage over us through long term planning. Makes you wonder what else they have planned for us.