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As China tightens its export control ratchet yet again this week (see our latest post), here comes another visual reminder of why Beijing’s actions are relevant and concerning:

Our friends at Benchmark Mineral Intelligence have put together a new infographic illustrating China’s critical mineral supply dominance specifically for graphite anodes.

Before Beijing unleashed its latest salvo of export restrictions – this time for Rare Earths – graphite was the lastest material to find itself in the Tech War crosshairs with the announcement that to protect national security, China would require export permits for certain graphite products – a move analysts saw as a play “to control supplies of critical minerals in response to challenges over its global manufacturing dominance.”

As the largest component by volume and mass in EV batteries, graphite is considered a battery critical and has been deemed the “unsung player” in the battery supply chain. According to Benchmark data, Chinese production accounts for 74% of the total supply chain for graphite anodes, posing a risk for anode producers in South Korea and elsewhere.

Diversifying supply away from China represents a massive challenge as China “is on track to retain over 85% of the global anode market share by the end of the decade,” according to Benchmark analyst Tony Alderson.

For a full size look at the infographic, which clearly illustrates not only the scale of the graphite challenge, but also provides a window into technical and sustainability questions surrounding it, and for more detail on synthetic versus natural graphite, click here.

Over the course of the past few years, the U.S. has taken several important steps to decouple critical mineral supply chains from China, especially those for battery materials and chip manufacturing, ranging from DPA Title III designations and subsequent Department of Defense funding of projects to federal legislation providing funding for projects from the U.S. Department of Energy.

In the graphite realm, projects currently underway are expected to qualify for the IRA credits, and ultimately help “domesticate” the graphite supply chain, including Graphex’s pitch coating facility coming online in Michigan, and Graphite One Inc.’s effort to establish an all-American mine-to-manufacturing supply chain. Graphite One’s Graphite Creek deposit near Nome, Alaska was recently recognized by the U.S. Geological Survey as the largest U.S. graphite deposit and among the largest in the world, and, since July, the company has been selected for two Department of Defense grants, under the Defense Production Act’s Title III authorities and by the Defense Logistics Agency.

Positive moves in each case, but, as the infographic clearly demonstrates, more remains to be done – particularly in light of China’s obvious readiness to weaponize its dominance in the critical minerals realm.

Only weeks before a planned November summit between Chinese President Xi Jinping and his U.S. counterpart, U.S. President Joe Biden, China’s commerce department has announced a new set of critical mineral export restrictions against what Nikkei Asia refers to as “a backdrop of domestic calls for a response to stricter limits on U.S. semiconductor exports to China.”

According to Nikkei, as part of the new restrictions, which will be in place until the end of October of 2025, the commerce department has added rare earths, including compounds and alloys to its “list of mineral resources and other items requiring disclosure of information such as material type and export destinations.”

The move ties into an overall context of export controls are gaining in popularity as the global race for resources heats up. India joined the ranks of countries considering export restrictions this August, and Kenya made similar headlines in October.  Zimbabwe banned lithium ore exports last December, and Namibia recently banned the export of unprocessed lithium and other critical minerals.

All these announcement tie into a larger trend, which has been noticeable particularly in Latin America, a region with a historic penchant for nationalism, but also elsewhere. ARPN has featured recent nationalist moves in Chile, Mexico and Bolivia, as well as in Myanmar, Indonesia, and China, and has showcased that even in the Western world, government involvement in the critical minerals sector is on the rise.

Of course, in light of Beijing’s dominating role in critical mineral supply chains and the current state of global affairs, China’s announcements relating to critical mineral export restrictions are not only highly consequential for U.S. domestic industry stakeholders, but must also be viewed through the prism of geopolitics, and as such U.S. national and economic security.

As Nikkei outlines, the U.S. has in recent years worked with Western allies to tighten exports of top-end semiconductors and chipmaking equipment to China, prompting Beijing to respond by considering banning “exports of manufacturing technology for high-performance magnets and other products that use rare earths” at the end of 2022.

Earlier this summer, China announced export restrictions on gallium and germanium, followed by controls on certain drones and drone-related equipment.  On October 20th, Beijing tightened the export control ratchet further – this time by announcing that to protect national security, the country require export permits for certain graphite products – a move analysts see as a play “to control supplies of critical minerals in response to challenges over its global manufacturing dominance.”

From a functional perspective, Chinese restrictions now extend to three of the key tech building blocs of the 21^st century:

-       Semiconductors (gallium/germanium)

-       Lithium-ion battery technology (graphite)

-       Permanent magnets (REEs)

As geopolitical tensions soar, this may not be the end of it. As ARPN stated before:

“As China ratchets up its export control regime (…) U.S. stakeholders would be well-advised to kick their efforts to bolster U.S. critical mineral supply chains into high gear.   For China – a ‘country of concern’ as per an August 9, 2023 Executive Order - it may be a short step from export controls to export embargoes.”

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