New Delhi: China Friday instituted new export controls on graphite, a mineral critical for batteries that power everything, from a mobile phone to electric vehicles (EVs).
The export controls will come into effect from 1 December, 2023, and highlight Beijing’s willingness to leverage its dominant position as a global supplier of critical minerals in its ongoing trade war with the West.
China is reported to be the world’s leading producer of graphite, responsible for almost two-thirds of the global supply, and refines more than 90 percent of the world’s graphite into material that is used in almost every battery produced for EVs.
By weight, graphite is the largest component in lithium ion batteries (LiBs) — an average EV battery contains 50 kg to 100 kg of graphite — and the World Bank estimates that it will dominate the demand for minerals required to produce batteries till 2050.
China’s export restrictions on this strategic mineral come at a time when the US has imposed additional curbs on the export of advanced semiconductor chips, including some produced by Nvidia, in an apparent bid to slow down Beijing’s technological progress.
“China has consistently been putting pressure on the US due to the chip war. It is signalling that if the US does not transfer the technology required to maintain its edge, no raw materials will be supplied,” Gunjan Singh, assistant professor at O.P. Jindal Global University and an expert on Chinese foreign policy, told ThePrint.
“Beijing knows it will take four to five years to recalibrate supply chains. During that time, it is creating pressure via processes to export critical minerals. It is a tit-for-tat response to force the US to negotiate with them,” Singh added.
Beijing’s export curbs are not the first that have been imposed this year.
In August, export controls by China on germanium and gallium — two minerals critical in the production of semiconductors for EVs, 5G technologies and defence applications — came into effect.
With graphite, which everyone consumes, China has only hardened its stance.
Graphite has been identified as a “critical mineral” by the government of India, and China was the largest destination from where India imported natural graphite (worth $14.31 million) between January 2022 and December 2022, according to data from the commerce ministry.
Between January and August 2023, China retained its top spot, with New Delhi importing $8.88 million worth of natural graphite from the country. This was, however, a 14.86 percent reduction in comparison to the same period in 2022, according to the data.
“For India, this (export controls) will delay the transition to greener technologies given that graphite is a key component for batteries. Beijing understands New Delhi’s transition push and such export controls will make it more expensive,” Singh said.
“The problem is between China and the US, and the rest of the world is caught in the middle of their trade war,” she added.
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‘Challenge to global politics’
The latest export restrictions are an attempt to challenge global norms and to signal to the West, and the US specifically, that China will not back down against global efforts to de-risk global supply chains, experts have told ThePrint.
China is even willing to make it more expensive to transition to green technologies globally to protect its own agenda and position itself as the largest supplier of components required for the adoption of new technologies, they said.
“This is Beijing’s challenge to the norms of global politics. The West needs the Chinese markets but refuses to give it a technical edge,” Singh said.
“China is looking to protect its own agenda. This move comes after the Biden administration announced a new batch of technical sanctions. China needs the technical edge due to its domestic slowdown — real estate specifically,” she added.
The domestic economic slowdown has made it imperative for China to have continued strength in global markets, Singh explained, and thereby forced it to push the US to the negotiating table.
Ritika Passi, a geo-economics analyst and Network for Advanced Study of China fellow at Takshashila Institution, pointed out that these export controls are not new or unexpected.
“The US and China are in a tit-for-tat technology and trade war. As the US commerce department further restricts Chinese access to advanced chips, Beijing is signalling that it’s willing to push its own advantages. This recent move sends a strategic signal — Beijing will not wait and watch, but will continue to test the waters,” Passi told ThePrint.
In the immediate future, EV manufacturers will scramble to stockpile graphite before the curbs come into effect, leading to a short-term increase in prices, Passi explained, adding that this introduces a significant risk of delaying global green transitions.
‘Signal to innovate’
According to Passi, there are two clear signals from China’s recent export controls in terms of diplomacy and the market.
“Diplomatically, Beijing is highlighting that it will not be quiet in the ongoing trade war. The implication is that this is just the beginning,” Passi said.
“It also sends a market signal — countries must continue to de-risk critical mineral dependence on China. Not only will diversification accelerate, this move should also act as a signal to innovate next-generation battery chemistries,” Passi added.
Passi highlighted that silicon is being developed as an alternative to graphite while tin is another mineral that has been identified as a potential alternative.
Even as Beijing signals its intent to escalate the trade war with the US, other countries in the process of transitioning to green energies such as India will be affected in the interim.
Passi pointed out that any export control would add risk to the global supply chains, as there are only few suppliers of graphite, while everyone is a consumer.
The result of this would be understood only in the long-term.
For instance, after the export controls on germanium and gallium came into effect, China exported zero amount of wrought germanium and gallium in August, while exporting only a kilogram of wrought germanium in September, effectively choking the international markets, according to a Reuters report.
(Edited by Nida Fatima Siddiqui)
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