China’s restriction on graphite exports could stymie US EV makers

The US transition to electric vehicles is about to hit another speed bump, courtesy of new restrictions from China.

On Oct. 20, the Chinese government implemented new export controls on graphite, a key material for EV batteries.

China supplies about one-third of US graphite imports, according to the US Geological Survey, and it’s the world’s leading graphite producer. In 2021, it produced about 79% of the world’s graphite. Meanwhile, North America produced only 1.2% of the global supply—though that’s likely to increase with graphite mining projects in the works in Alabama and Alaska.

It’s too soon to say to what extent China will use the new rules to crack down on exports and how the new restrictions will ultimately affect battery costs, but in the short term, some experts expect graphite prices to rise. The timing is less than ideal for the burgeoning US EV industry, as companies race to open new battery factories representing billions of dollars in investments.

The new rules mean that companies exporting high-grade graphite will have to apply for approval, the Washington Post reported. China has also restricted exports of two other minerals: gallium and germanium.

The move has implications for EVs because graphite anodes are the industry standard in EV batteries today. There are growing efforts within the industry to reduce reliance on graphite for anode material, partly because of its expense, but for now it remains a crucial component.

Making it harder to obtain graphite could drive up the cost of EV batteries, which is already a pain point in an industry that’s working to lower costs to make EVs more affordable for consumers put off by steep price tags.

“It’s really the last thing that anybody wants to see, as they’re ramping up production of batteries and EVs,” Sam Abuelsamid, principal research analyst at Guidehouse Insights, told Tech Brew. “Affordability is one of the primary barriers to EV adoption. And if all of a sudden, battery prices go up because there’s some spike in the price of graphite, that just makes it harder to sell EVs again.”

Experts and industry stakeholders say the move is a reflection of the simmering geopolitical tensions between China and the US, but also of the strength of China’s domestic EV market, the largest in the world. Sales there are increasingly led by domestic manufacturers that are taking advantage of the country’s supply-chain advantages.

For Graphex Technologies, a Hong Kong-based company that processes graphite for anode material, the new restrictions increase the urgency to get operations in North America up and running, CEO John DeMaio told Tech Brew. Graphex is preparing to open a processing plant in suburban Detroit as part of a push to localize production there.

“It validates what we were doing already, which was bringing our expertise over here and building out production capabilities,” DeMaio said. “What I hope it does is accelerate that, not only for us but for the rest of the whole ecosystem.”