NRPLUS MEMBER ARTICLE {C} hina introduced export controls on graphite last week after the U.S. limited the communist-run country’s access to high-end semiconductor chips. China will now issue graphite export permits, starting on December 1.
“It is a common international practice to impose export controls on specific graphite items. As the world’s largest graphite producer and exporter, China has long been firmly fulfilling its international obligations, such as non-proliferation,” the country’s commerce ministry said. “Based on the need to safeguard national security and interests, China has implemented export controls on specific graphite items in accordance with the law, and implemented temporary controls on some graphite items.”
The natural-graphite market doesn’t have much competition, according to U.S. Geological Survey data from 2021. Brazil, graphite’s second-largest producer, only turns out about 8 percent of China’s supply. Mozambique is third, producing less than 4 percent of what China does. Meanwhile, the U.S. imports 100 percent of its graphite and hasn’t produced graphite domestically for decades. As with other critical mineral markets it dominates — lithium, cobalt, nickel — China can squeeze graphite exports whichever way it sees fit. Japan might challenge China’s move at the World Trade Organization, Reuters reported, which was successful in 2014 when the U.S., the European Union, and Japan pushed back against China’s rare-earths export ban.
China issued its latest control directly after the U.S. Department of Commerce tightened artificial-intelligence chip exports over concerns that China could use Nvidia’s A800 and H800 chips for military development. U.S. policy-makers expected economic retaliation (also in response to the European Commission’s recent investigation into subsidized Chinese EVs) — and China’s graphite restrictions certainly pack a punch.
It’s not the first time China has leveraged minerals to disadvantage the West. China restricted exports of gallium and germanium in July, which Vice Commerce Minister Wei Jianguo said was “just the start” of a mineral war if the U.S. continues to curtail China’s tech industry. National-security adviser Jake Sullivan said this year that “clean energy supply chains are at risk of being weaponized in the same way as oil in the 1970s or natural gas in Europe in 2022.”
The U.S. can’t just forfeit its foreign mineral supply, and China can certainly afford to restrict foreign access, given its near-monopoly over rare minerals. Aerospace and energy sectors need graphite for jet engines and lithium-ion batteries that power EVs, phones, and renewable energy. Former vice minister of commerce Wei Jianguo warned in July that “China’s toolbox has many more types of measures available.”
This all leaves the U.S. outsourcing mineral production and scrambling to shore-up long-neglected domestic production efforts. Only in recent years has the U.S. invested in domestic mining. The U.S. doesn’t mine or refine graphite, though projects in Alaska and Alabama will change that soon. China, on the other hand, mines 65 percent of the world’s graphite and refines more than 90 percent of it. China also controls an estimated 93 percent of anode materials used in EV batteries (lithium-ion batteries most commonly use graphite-based anodes).
In the 1950s, Alabama had great graphite mining capability until foreign markets began to produce cheaper, synthetic graphite. Mines now need government funds to expedite domestic production, which is the best long-term alternative to reduce reliance on China. The U.S. could invest in foreign mines, although those may not be promising investments given regional disputes, child-labor practices, and toxic mining operations. For better or worse, regulation holds American companies to the safest and best mining standards.
Federal initiatives to bolster production efforts are limited but substantial. In 2022, President Joe Biden invoked the Defense Production Act to classify minerals such as lithium, cobalt, graphite nickel, and manganese as essential to national security (defense, aerospace, and energy industries use all of these minerals). The DPA authorized funding for exploratory mine projects and mineral production, then Biden signed the Inflation Reduction Act (IRA) that August, which also authorized economic incentives to boost the domestic mineral supply chain.
Biden’s Department of Energy invested heavily in Australia-based Syrah Resources Limited to fund two projects: A Louisiana graphite-processing plant, and its feeder mine in Mozambique. But an Islamist insurgency that rose up near the Mozambique mine could prove detrimental, if not disastrous, to the mine’s production. Although it’s a worthwhile immediate pursuit for the U.S. to explore alternative methods of graphite mining and production outside of China, local strife makes mining operations in the Middle East unreliable. Greenwire reported that “militants have attacked natural gas projects in the province,” and “although the insurgency so far has stayed away from the area around Syrah’s mine . . . mining there over time could foster a cycle of extraction, dislocation and distrust ripe for exploitation by extremists.” America can’t predict, control, or resolve those disputes.
Yet there’s plenty of graphite in North America. Graphite One’s mine project in Alaska could yield high-quality graphite in high quantities. With IRA funds, the Department of Defense awarded the Vancouver-based company a grant to develop the mine, but the grant will only help Graphite One complete its economic-feasibility study faster. There are more federal permits and infrastructure matters to wrestle with, which will take time that the U.S. doesn’t necessarily have, considering China’s hold on graphite. Graphite One plans to mine, refine, and recycle the graphite in Alaska by 2029, a giant effort that, if successful, would produce 75,026 metric tons of advanced graphite products per year, according to the company. Curiously, though, Graphite One enlisted help from Chinese advisers on its Alaskan battery-anode factory.
Lucky for the U.S., our land contains some of the world’s best mineral deposits. That the U.S. is so reliant on China for critical minerals is not good — but the graphite war may finally force the federal government to prioritize American mining, at least to a greater extent. About time.