China’s dominance in graphite production.
China currently dominates global graphite production and exports. Although the exact impact of China’s export restrictions on battery production is still unclear, experts generally agree that this decision will have negative consequences. It could lead to a reduction in graphite supply and a potential increase in the cost of battery production.
The move comes amid heightened tensions between the world’s superpowers and their ability to cooperate and reach agreements. The ongoing trade and political disputes between the US and China, involving companies such as Huawei and ZTE, now appear to be extending their influence to Europe.
Is China’s export restriction part of a larger dispute?
China’s status as the unrivaled leader in graphite supply gives it significant leverage in the transition to electric vehicles not only in China, but around the world. The export restrictions, effective December 1 of this year, will apply to both natural graphite and graphite products and high-purity synthetic graphite, which accounts for about 70% of China’s total production and is increasingly used in batteries.
China’s restrictions go beyond graphite, however. They also extend to rare and potentially strategic metals, as evidenced by the restrictions imposed in August on metals needed for the production of microchips, such as gallium and germanium. There has been a clear decline in China’s exports of these metals in recent months, suggesting that the situation with graphite could repeat itself.
Impact on electric cars and beyond.
A potential graphite shortage could significantly impact the production of batteries for electric vehicles and the entire electronics industry as a whole. Electric vehicles (EVs) have become a cornerstone of efforts to reduce carbon emissions and combat climate change. However, the sustainability and growth of the electric vehicle sector depends on a stable supply of vital materials such as graphite for lithium-ion batteries.
This development underscores the importance of diversifying sources of critical raw materials and creating sustainable supply chains for electric vehicle production. As China’s dominance in graphite production becomes more apparent, governments, industry and investors should consider strategies to reduce potential disruptions and dependence on a single supplier.
This situation serves as a reminder of the complex interplay between geopolitics, industry and the desire for a cleaner future. It underscores the need for international cooperation and proactive measures to ensure a sustainable transition to electric vehicles and renewable energy.