China's Ministry of Commerce has announced restrictions on the export of gallium and germanium, as well as a new requirement for foreign companies to obtain permits to receive graphite. Gallium and germanium are essential materials for military technologies, while graphite is a crucial component in almost every electric vehicle (EV) battery.
The move by China could have significant implications for the global EV market. The United States, for example, did not produce any natural graphite in 2022 but consumed 72,000 tons of it, valued at approximately $170 million, that year. According to a report from the U.S. Geological Survey, the consumption of graphite in the U.S. is expected to increase, largely due to the growth of the EV market. China currently dominates the graphite market, producing around 65% of the global supply.
Graphite anodes are a key component of EV batteries, and although there have been efforts to develop substitutes such as silicon or other materials, these alternatives are not yet commercially viable on a large scale. Caspar Rawles, the chief data officer at Benchmark Mineral Intelligence, warns that China's graphite export restriction, while not a complete ban, could still impact the American EV market. The extent of this impact will depend on how long it takes for companies to obtain permits and the requirements of the permit application process.
The export restriction imposed by China underscores the need for the United States and its allies to strengthen critical supply chains, according to Rep. Mike Gallagher, chairman of the Select Committee on the Chinese Communist Party. Axios reports that the United States has been investing in efforts to secure graphite from Mozambique. However, the mine in which the Biden administration is investing has faced challenges such as labor strikes and a religious insurgency.
Controlling critical mineral supply chains is a key objective of Chinese President Xi Jinping's Belt and Road Initiative. These minerals, including those used in EVs, are also vital components in smartphones, satellites, and other technologies. Chinese officials view dominance in mineral supply chains as a tool to leverage against the United States and as part of Beijing's strategy in the global power contest, according to Emily de La Bruyère, co-founder of Horizon Advisory.
China's announcement of export restrictions comes shortly after Washington announced restrictions on China's access to certain computer chips.
