China’s New Move on Graphite: What it Means for Electric Vehicles

China’s recent announcement of export license requirements for some graphite products has raised concerns over the global supply chain for electric vehicle batteries. With the majority of global processing capacity for graphite in Chinese hands, this new move is causing a ripple effect, with global carmakers struggling to diversify.

Graphite is an essential component in building an anode, which allows electric current to flow through a battery. The global demand for graphite is set to triple by 2033, and China currently accounts for 64% of the global production of natural graphite and over half of the artificial equivalent. More importantly, China refines over 90% of the graphite into high-purity material used in EV batteries. Hence, the recent announcements have raised concerns over the possible shortages of these materials in the future.

The decision to impose export license requirements on graphite products follows the recent restrictions by the United States on chip exports. The move is being seen as retaliatory in nature, and it is similar to the approach that China already used earlier this year when it restricted exports of gallium and germanium, metals used in chips and fiber optic cables, triggering a fall in international shipments.

The implications of this move are significant for global car manufacturers, who will find it challenging to diversify their sources, given the vast majority of processing capacity is in China. While there are alternative reserves, such as Madagascar, Sri Lanka, and India, which together, account for a significant share of natural graphite reserves, they do not have adequate refining capacity. Moreover, it will take time to build and develop this infrastructure to meet the demand.

European car manufacturers are better positioned because they have significant shares in natural graphite mining in Africa, Canada, and Europe. However, building up the refining capacity to create high-purity graphite is a challenge. That is why inevitably, over time, the industry will have to develop domestic resources while also putting more emphasis on the recycling of batteries.

China’s decision to impose export license requirements on graphite could have far-reaching ramifications for the global electric vehicle industry. With China controlling a significant percentage of the world’s graphite production and refining, it may lead to rising costs and supply chain dependence for car producers outside of China.

This could serve as a wake-up call for the industry and accelerate investment in the development of domestic resources, alternative sources of graphite, and recycling. The need to reduce dependence on China can help in building a more resilient, sustainable, and robust supply chain that will ultimately benefit the industry.