Trucks drive past containers at Yangshan Deep Water Port in Shanghai, China, January 13, 2022. Picture taken January 13, 2022. Portal/Aly Song/File Photo Acquire Rights
BEIJING, Oct 20 (Portal) – China said on Friday it will require export permits for some graphite products to protect national security. This is its latest move to control supplies of critical minerals in response to challenges to its global manufacturing dominance.
China is the world’s largest producer and exporter of graphite. It also refines more than 90% of the world’s graphite into the material used in virtually all electric vehicle battery anodes, the negatively charged part of a battery.
Beijing is seeking the export permits at a time when many foreign governments are increasing pressure on Chinese companies over their industrial practices.
The European Union is considering imposing tariffs on electric vehicles made in China, arguing they unfairly benefit from subsidies. Additionally, earlier this week the U.S. government expanded restrictions on Chinese companies’ access to semiconductors, including halting sales of more advanced artificial intelligence chips from Nvidia.
China’s Ministry of Commerce said the move was “conducive to ensuring the security and stability of the global supply chain and industrial chain, and conducive to better protecting national security and interests.”
It added that it was not targeting any specific country. According to Chinese customs, the top buyers of graphite from China include Japan, the USA, India and South Korea.
Under the new restrictions, starting December 1, China will require exporters to apply for permits to ship two types of graphite, including synthetic graphite material with high purity, high hardness and high intensity, and natural flake graphite and its products.
Three types of “highly sensitive” graphite items are already under temporary control, the Commerce Department said, and are included in the new list.
Meanwhile, temporary controls have been lifted on five less sensitive graphite items used in basic industries such as steel, metallurgy and chemicals.
As electric vehicle sales rise, automakers are scrambling to secure supplies from outside China, but shortages are looming.
“With this new graphite export restriction, South Korean companies that rely heavily on China for graphite imports would have to look for alternatives, such as mines from the United States or Australia, but it would likely increase the cost burden for many,” said Kang Dong-jin, an analyst at Hyundai Motor Securities.
Japan’s top government spokesman Hirokazu Matsuno said on Friday the country plans to ask China about the “operational guidelines” of the new measures and will take “appropriate steps” if they violate World Trade Organization rules.
Shares of China’s new energy vehicle and battery makers rose after the announcement.
SIMILAR BOARD STANDS
The restrictions are similar to those in place since August 1 on two chipmaking metals, gallium and germanium. The restrictions have recently severely limited exports of these metals and driven up prices outside the country.
Analysts said it was not clear what impact the new measures would have on graphite in the near term.
“This control is not a complete ban, and during the previous temporary control there was no significant impact on any industry,” said Ivan Lam, senior analyst at Counterpoint Research.
Mysteel said natural flake graphite prices were at 3,950 yuan ($539.62) per tonne this week, down 25.5% from earlier this year due to declining demand from the electric vehicle sector.
Still, exports are likely to rise before December 1, said Rystad Energy analyst Echo Ma, particularly to countries with established battery industries such as Japan, South Korea and the United States.
“We expect the average price of graphite to continue to rise in the future due to imbalances between supply and demand, including Russia, which was one of the largest suppliers of graphite before the Russia-Ukraine war,” Counterpoint’s Lam said.
China has reduced natural graphite mining in recent years to protect the environment and has instead increased production of synthetic graphite since 2021. According to the consulting firm Mysteel, the synthetic form now accounts for 70% of Chinese production.
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($1 = 7.3200 Chinese Yuan Renminbi)
Reporting by Siyi Liu, Amy Lv and Dominique Patton in Beijing, Brenda Goh in Shanghai, Heekyong Yang in Seoul; Editors: Christopher Cushing and Christian Schmollinger
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