The Chinese government is taking steps to enforce stricter controls on the export of graphite, exacerbating the ongoing trade tensions between the United States and China.
Graphite plays a crucial role as a key component in electric vehicle (EV) batteries, with China currently dominating the global supply market. The introduction of export controls is expected to drive up the prices of this material for EV manufacturers like Tesla (TSLA) and intensify the search for alternative sources of graphite.
China’s Ministry of Commerce announced that certain types of graphite exports to foreign customers will be subject to new regulations starting December 1. This decision follows closely on the heels of the United States tightening controls on the export of advanced semiconductors to China.
A spokesperson for China’s Ministry of Commerce emphasized that these export controls are not aimed at any specific country or region. Instead, they are framed as a part of the country’s routine adjustments to export regulations. Exports that fully comply with the relevant regulations will still be permitted.
In response to this development, Tesla and other EV manufacturers have already taken steps to secure graphite supplies from sources outside of China. Earlier this year, Tesla entered into a supply agreement with Magnis Energy Technologies (MNS.Australia), a company that produces graphite concentrate in Tanzania.
Nevertheless, the implementation of China’s export controls could have broader implications for the graphite industry, potentially impacting prices across the board. This uncertainty has caused shares in graphite company Syrah Resources (SYR.Australia), also a Tesla supplier, to surge by 16% in Sydney on Friday.
As for Tesla, its stock experienced a slight dip in premarket trading on Friday, following a 9.3% drop after its Q3 earnings failed to meet Wall Street’s expectations.
China’s export controls will specifically cover high-purity and high-density synthetic graphite materials, as well as natural-flake graphite.