China recently announced revised graphite export regulations that will take effect in December 2023. Battery suppliers noted that the restrictions will likely impact critical materials procurement for lithium-ion batteries as graphite is used in most anodes, and the situation is expected to hinder the growth of EV and energy storage system (ESS) industries.
The Chinese government released the regulations on October 20, saying it will ban the exports of high-purity, high-hardness, high-intensity synthetic graphite materials and natural flake graphite, and its products unless there is approval.
Japan, the US, India, and South Korea are the primary importers of China-made graphite. According to media reports, the South Korean government called for an emergency meeting to discuss measures to maintain the country's stable battery production. South Korea imported US$241 million of graphite in 2022, of which 93.7% were from China.
The Japanese government said it would clarify the situation with China and will take appropriate actions if China's new restrictions violate rules set by the World Trade Organization. Japan-based media reported that local and European EV companies will encounter challenges in procurement.
China's Ministry of Commerce said the export restrictions do not target specific countries or regions, and those who comply with the regulations will receive export approval.
Export restriction becomes the bargaining chip
Suppliers said the restrictions are different from bans. They expected the new regulations would be similar to the curbs that China has put on chip materials gallium and germanium, and such regulations would not strike the industry directly or significantly in the beginning. The measure will become its bargaining chip with other countries.
If China strictly enforces the export regulations, South Korea is expected to intensify its collaboration with China because it has invested heavily in battery production in Europe and the US. The US and Europe aim to reduce reliance on China's battery supply.
South Korean and Japanese battery makers focus on producing ternary batteries. However, companies like LG Energy Solution, SK On, and Samsung SDI have also invested in LFP batteries as the technology sees surging adoption in the EV and ESS sectors.
China-based battery manufacturers, including CATL, BYD, and Gotion High-tech, accounted for 99% of the global LFP battery market. These companies also have a significant presence in the ternary battery segment, pushing South Korean battery makers to work with them.
Lithium-ion battery companies said China is the world's largest producer of synthetic and natural graphite, which can be used in anode materials. Most of the industry uses synthetic graphite for now.
Countries outside China still lack processing facilities for synthetic graphite, which companies would have to spend two years to build. The processing will take tremendous energy, making companies look for locations accessible to green energy. However, countries that manufacture synthetic graphite by themselves will unlikely create a cost advantage that China boasts.
China's graphite export restrictions will have a limited impact on Taiwan's battery industry, which is still scaling up its production capacity. Most Taiwan-based battery makers said suppliers in different countries expected more mineral restrictions due to geopolitics and sought materials in non-China areas.
Chinese media reported that leading local anode material makers like BTR New Material and Shanshan Technology said the new restrictions have limited impact on their graphite business as they have approval for synthetic graphite exports.
Article translated by Peng Chen
