China’s new export controls on graphite—a pivotal material for electric vehicle (EV) batteries—pose a potential price surge for EVs in the U.S.
Announced Friday, the controls mandate export permits for certain graphite products, underscoring China’s intent to guard its manufacturing supremacy amid global critiques on its industrial practices.
China refines over 90% of the world’s graphite, which is integral to the negative electrodes in EV batteries like those used by Tesla. The U.S. is the top importer of graphite sourced in China, with an estimated $745 million worth of the commodity shipped in between January and September of this year.
Nhac Nguyen/AFP/Getty Images
The new controls come at a time when tensions around industrial practices have led to foreign governments tightening the screws on Chinese companies. The European Union is mulling over tariffs on Chinese-made EVs while investigating the legality of subsidies on China’s EV value chains, reflecting a growing global concern over the country’s market influence.
The U.S. has recently clamped down on the export of certain high-performance integrated circuits to China, primarily aiming to stifle the country’s AI and semiconductor technologies. U.S. measures are part of a broader strategy to mitigate potential national security risks posed by China’s rapid tech advancements. China, led by Xi Jinping, said the new export controls on graphite are of national security interest as well.
According to China’s commerce ministry, the move was “conducive to ensuring the security and stability of the global supply chain and industrial chain.”
It is all part of a broader geopolitical struggle over critical tech and resources, which has left analysts and industry insiders to process the potential ramifications of China’s latest move. “This action could set [prices] on an upward trajectory internationally, while keeping domestic prices low for Chinese battery producers,” Tom Kavanagh, head of battery metals at Argus, told Reuters.
Amid the global race towards EV adoption, the controls also add a layer of complexity to an already convoluted supply chain.
As Neil Wilson, chief market analyst at broker Finalto, said: “It’s Trade Wars 2.0 and it’s inflationary.”
The stakes for global automakers and battery manufacturers are soaring. With the December 1 deadline looming for the new graphite export controls, companies are re-evaluating their supply chains.
South Korean firms, heavily reliant on Chinese graphite, are already exploring alternative sources from the U.S. or Australia, albeit at a likely higher cost.
As the U.S. and other nations grapple with the new challenges, the trajectory towards more self-reliant supply chains becomes inevitable. The quest for more affordable EVs in the U.S. might face headwinds, making the journey towards a green automotive future a tad more turbulent.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.