China announced on Friday that it will require export permits for graphite, a key material for electric vehicle batteries, starting December 1. The country is the world’s top graphite producer, and the move could spur procurement difficulties for global EV makers.
Regulations will be introduced based on the Export Control Law and others that tighten export controls on strategic goods, preventing Chinese companies from exporting unless they go through the authority’s examination process and obtain permission.
Graphite, one of the most widely used materials for EVs, is used in automotive anodes, the negatively charged portion of the battery.
China makes up about 65% of global production of this key material, according to the US Geological Survey. In particular, Chinese companies are believed to hold over 80% of the market share in negatively charged materials for automotive batteries, in which high-purity graphite is essential.
The European Union has launched an investigation into whether Chinese-made EVs have unfairly impeded competition by being sold at low prices through subsidies. “We take the export restrictions as a deterrent to the EU investigation,” said a source at European business.
There had been concern that Northvolt, an emerging battery company headquartered in Stockholm, may have trouble procuring graphite and anode materials, which could possibly damage plans to increase production.
According to sources, Chinese companies have temporarily stopped supplying the company and its business partners or have shown reluctance to expand supply. Northvolt works with Volkswagen and other companies, and Western companies have become increasingly wary of the battery maker’s dependence on China.
Western auto giants are already rushing to secure new suppliers before China officially implements its export restrictions. US-based Tesla has signed a supply contract with an Australian company that owns a graphite mine in Mozambique, Reuters, and other media reported. Others, such as German automaker Mercedes-Benz, are also rushing to secure graphite by teaming up with Australian companies.
For the time being, however, Chinese companies still handle much of the high-purity graphite production and the supply chain for anode materials.
“It will be difficult to establish a supply chain outside of China immediately,” an executive of a European company said. “Export restrictions can potentially be a bottleneck for the expansion of EV production,” he added.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.