China graphite export restrictions permits secure national security global dominance
October 23, 2023
China introduces graphite export permits to secure national security and global dominance

China’s government has confirmed the introduction of graphite export permits in order to safeguard national security in light of growing challenges to its global manufacturing dominance.

From December, the world’s leading graphite producer and exporter will require domestic companies to apply for permits before they can ship their critical minerals to international markets.

The nine items covered by the new restrictions include three types of high-purity, high-strength and high-density artificial graphite and its products, as well as six types of natural flake graphite and related products.

Securing the leading position

The graphite curb is being imposed in a bid to secure China’s position at the top of the graphite mining and production hierarchy.

It is an updated and optimised version of temporary controls imposed on seven graphite-related products in 2006.

Five of those (which are used in basic industries such as steel, metallurgy and chemicals) have since been removed due to their low sensitivity.

China made a similar move in August for chip-making metals gallium and germanium.

Those restrictions are reported to have drastically reduced the export of those metals and pushed up prices outside of the country.

Alternative sources of supply

The new export permits will mean that countries which rely heavily on China for their graphite imports — such as South Korea, the US, Japan, Poland and India — would need to seek alternative sources of supply.

China’s government said the move was “conducive to ensuring the security and stability of the global supply and industrial chain, and conducive to better safeguarding national security and interests”.

It added that it was not targeting any specific country.

Primary source and producer

Graphite is widely used to make batteries, fuel cells and lubricants for the machinery, petrochemical, defence and aerospace sectors.

China is the primary source and producer of the world’s natural graphite stocks, outputting an estimated 65% of total world supplies last year according to the US Geological Survey.

It also refines more than 90% of the world’s graphite into materials used in virtually all electric vehicle battery anodes.

The importance of graphite has been on the rise amid a global move away from fossil fuels, with the European Union listing natural graphite as a critical raw material in 2020.

The US also considers it to be a critical and strategic mineral.

Recent US restrictions

China’s announcement comes just days after the US imposed additional limits on the kinds of semiconductors that American companies can sell to Chinese firms.

It will include advanced artificial intelligence chips such as the H800 and A800 produced by US-based Nvidia, but will leave out those used in smartphones, video games and electric vehicles.

Nvidia briefly hit a market capitalisation of $1 trillion in late May on the back of a boom in demand for its AI chips.

Southeast Asia is one of Nvidia’s key markets, with transactions from mainland China and Hong Kong accounting for 22% of its revenue last year.

The US government said the added limits would “increase the effectiveness of our controls and further shut off pathways to evade our restrictions”.

“We will keep working to protect our national security by restricting access to critical technologies, vigilantly enforcing our rules, while minimising any unintended impact on trade flows,” it said.

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