On 20 October 2023, China announced its plans to impose export controls on several graphite products. Graphite is a key component in electric vehicle (EV) batteries. As of 1 December 2023, China will be requiring “special export permits for three [different] grades of graphite”. Concretely, this means that exporters will have to apply for additional permits to ship these abroad. As a part of the new controls, companies will also have to hand over confidential commercial information that was not previously required. While the rules do not impose an outright trade ban, they do create a lot of uncertainty.
🌱 Who are the largest graphite producers and buyers?
China is the largest producer and exporter of graphite. It produces two-thirds of the global supply and refines over 90% of the world's graphite. China is also dominate in the production of synthetic graphite. It produced nearly 70% of the world's synthetic graphite last year. According to customs data, China exported 424 706 metric tons of synthetic graphite in the first nine months of 2023. This is a 45% increase compared to the year before. The largest buyers of graphite from China include the U.S. (which sources nearly a third of its graphite from China), Japan, South Korea, and India. The largest producers of graphite after China are Mozambique, Madagascar, and Brazil.
🌱 What impact do the rules have?
The short-term impact of the new measures is still unclear. Directly after the announcement, the share prices of Chinese battery and EV manufacturers rose. To try to mitigate potential negative effects, foreign and export companies are likely to increase their exports of graphite before 1 December 2023 and to search for alternative suppliers outside China. Several U.S. mining companies have also pushed for an ease of the U.S. permit review process in response to the new rules.
🌱 What is the political context?
China said that it introduced the export controls on “national security” grounds. Its commerce ministry stated that “it was not targeting any specific country” and that the measures were “conducive to ensuring the security and stability of the global supply chain and industrial chain, and conducive to better safeguarding national security and interests”. Many foreign analysts and politicians, however, say that China is “hit[ting] back at [the recent] US-led restrictions on technology sales to Chinese companies”. Notably, the European Union has also recently been considering levying tariffs on EVs produced in China. Japan has now said that it will examine whether China’s new measures breach World Trade Organization rules and other international rules.