Wall Street Breakfast: Graphite Curbs
Oct. 20, 2023 7:01 AM ET SEDG, ENPH, RUN, CMCSA, CHTR, T, VZ, CVS, WBA, KVUE, WMT, TM, TSLA, JAZZ, SGEN, PFE5 Comments
Wall Street Breakfast
Graphite curbs
After choking exports of chipmaking metals gallium and germanium, China is stepping up its efforts to maintain its manufacturing dominance by restricting exports of graphite, a key material used in electric-vehicle batteries. Beijing's move comes just days after Washington unveiled new restrictions on AI chip exports to China.
Dig deeper: Beijing will require special export permits for three grades of graphite starting December 1, the Ministry of Commerce and the General Administration of Customs said. Temporary controls on five less sensitive graphite items used in industries such as steel, metallurgy, and chemicals were dropped. The new curbs are "conducive to ensuring the security and stability of the global supply chain, and conducive to better safeguarding national security and interests," the ministry said. It clarified that it was not targeting any particular country. Top buyers of graphite from China include the U.S., South Korea, Japan, and India.
Bigger picture: The U.S. has been targeting China's access to advanced technologies over national security concerns, with the Biden administration issuing rules in Sept. to regulate U.S. investments in China in semiconductors and microelectronics, quantum information technologies, and AI. Beijing has pushed back by leveraging its dominance over certain materials. To note, China is the world's top graphite producer and exporter. It also refines over 90% of the world's graphite into the anode material used in EV batteries - the largest component by weight in such batteries.
Ivan Lam, senior analyst at Counterpoint Research, does not expect a major impact in the near term, as graphite exports haven't been completely banned. But he said the material's prices will likely increase due to supply and demand imbalances, including Russia - which was once a major graphite supplier. CLSA's Christopher Richter said it would be a "bold" step to cut the world off from graphite, as that would likely bring EVs to a halt everywhere and probably escalate tensions between China, the U.S. and Europe.
