Industry executives and analysts warned that China’s decision to stop exporting graphite, a crucial component for electric car batteries, on Friday will only speed up attempts to find alternate sources and materials, but that process will take time.

As on December 1, some graphite goods, such as spherical graphite used by automakers, would require export permits from China, the major producer and exporter of graphite worldwide. The substance used in nearly all EV battery anodes—the negatively charged part of a battery—is refined from more than 90% of the world’s graphite.

Industry executives warned that China’s move would intensify trade disputes worldwide and encourage other nations to give priority to researching alternate sources and materials.

“We see China’s move as a potential catalyst to highlight the urgency of improving (U.S.) graphite supply,” said John DeMaio, president of Graphex Group’s (6128.HK) graphene division.

By the end of 2024, Graphex intends to establish a graphite processing plant in Warren, Michigan, to provide the essential metal to American automakers at an annual capacity of at least 10,000 metric tonnes.

In the West, Graphex wants to be a refiner rather than a miner. According to DeMaio, it has contracts with Syrah Resources for graphite supply and is searching for other sources.

Tesla has been at the forefront of obtaining graphite and inking agreements with Syrah and Magnis Energy Technologies. The company did not reply to a request for comment.

With an emphasis on creating synthetic graphite, new investments in the U.S. and Europe seek to break China’s monopoly on the material, but experts in the field predict that this will be a difficult task.

According to Benchmark Mineral Intelligence, by 2025, synthetic graphite may make up about two thirds of the market for EV battery anodes.

Nonetheless, massive Chinese manufacturers of battery materials, such BTR and Shanshan, are also spending hundreds of millions of dollars to increase the output of synthetic graphite.

The synthetic graphite startup Vianode, based in Oslo, plans to begin small-scale manufacturing in Norway next year and ramp up to full-scale production in Europe and the U.S. by 2030, with enough material to supply about 2 million electric vehicles.

Chief Operating Officer Hans Erik Vatne recently told Reuters that while it will cost more to enhance the manufacture of synthetic graphite, it is necessary to lessen dependency on China.

“Are we as consumers willing to pay more to have that sustainable materials in our batteries?” he said in August. “That’s really what we need to hope for because we need a higher price because the capex of building such a plant with this advanced technology is higher.”

An additional component of the anode is silicon, which allows an electric vehicle to travel farther between charges.

Since silicon swells while in use and can weaken batteries, the maximum amount that should be added to batteries is 10%. However, businesses are attempting to increase that share.

A U.S. business called GDI, for example, is creating battery anodes made entirely of silicon. According to GDI CEO Rob Anstey, his company is discussing the technology with the majority of automakers.

“China is decades ahead in graphite and it’s too late to try and catch up,” he told Reuters on Friday. “We must move to the next level of lithium-ion and EV performance.”

“This is our time to wake up and say, okay we need to start working on the next generation of battery and of materials,” he added.

Similar to what happened in August following a similar move for two metals used to make chips, germanium and gallium, the Chinese limits may also result in decreased exports and higher pricing.

“This regulation is expected to increase the scarcity of graphite, which in turn raises the cost of power batteries, leading to higher production costs for EVs,” Canalys analyst Alvin Liu said.

Increased expenses would not be desirable because many automakers sell EVs at a loss. Automakers are scrambling to secure supplies from outside China due to the surge in EV sales, but shortages are imminent.

Graphite has historically been primarily used in the steel sector, but according to BMO Capital Markets’ prediction, EV sales are expected to more than triple by 2030, reaching 35 million from 2022.

For the anodes, each EV requires between 50 kg and 100 kg (110 pounds to 220 pounds) of graphite in its battery pack, which is almost twice as much as lithium.

On Friday, automakers remained mostly silent as they considered the ruling.

“We don’t expect short-term effects on our supply situation, but will watch the issue closely,” BMW said in a statement. “We could react quickly and flexibly in our risk management if necessary.”

Renault and Volvo Automobiles stated they were actively monitoring the situation but that it was too soon to comment.

While Mercedes declined to comment, it did announce in June that it was expanding its sources of raw materials, including graphite. Rivian and Stellantis declined to comment.

We were unable to immediately get in touch with representatives from Lucid, Fisker, General Motors, Ford, and Volkswagen for comment.

(Adapted from StraitsTimes.com)

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