Graphite belongs to the group of critical materials, that is, those minerals or substances essential for the production of key energy technologies, such as batteries used in electric cars. China is its main global producer, and also houses one of the largest reserves of said mineral in its territory. Beijing’s dominance is such that forces electric vehicle manufacturers to depend on the Asian giantor, something that undermines the business of American critical materials producers. Faced with this situation, some graphite producing companies have taken advantage of the tariff threats of Donald Trump, the new tenant of the White House, to promote very high rates on Chinese graphite imports.
US producers of key minerals used in electric car batteries have launched trade action to increase tariffs on graphite from China by up to 920%. The sector justifies this movement by arguing that Beijing’s large subsidies for the production of these minerals artificially lowers their price, including graphite, making it impossible to compete with them on equal terms. This dark mineral is used, among other things, to make the battery’s anode.
Specifically, an association representing American graphite producers has made two requests to federal agencies this Tuesday, asking the authorities to investigate whether Chinese firms are violating anti-dumping laws. This is a risky request, since graphite currently accounts for 10% of the entire production cost of a battery cell used in electric cars, so a 900% increase in the price of said mineral would practically double the cost of total production.
China’s control over graphite
In this sense, producing a battery in the US costs 20% more than doing so in China. In addition to subsidies from Beijing, other reasons explain this difference, such as the fact that the Asian giant has 15% of the world’s graphite reserves and that In 2023, it brought together 91% of the refining of said material. This, in fact, is one of the key characteristics of critical materials: their high geographical concentration. Another example of this is Chile, a country that concentrates more than 30% of the world’s lithium reserves.
On the other hand, the United States does not produce natural graphite, so Washington has made efforts to promote investments in mining and production of synthetic graphite with the aim of reducing its dependence on China. Thus, the United States imported more than 91,000 tons of graphite in 2023, 70,000 of them from China. Beijing’s dominance over this mineral is such that last year it controlled 92% of the market for high-grade graphite used in battery production.
A drowning hazard
Faced with this situation, American graphite producers have seen an opportunity to strengthen their position against China. According to Erik Olson, spokesman for American Active Anode Material Producers, the organization that has sent the petitions for anti-dumping investigations, the industry “risks drowning due to malicious Chinese trade practicess”. Olson points out that it is necessary to protect North American industry to allow its growth, indicating that to do so it is necessary to put stones in Beijing’s path.
It is evident that the American graphite lobby has wanted to surf the tariff wave with which Trump intends to soak the world economy, splashing its own trading partners. However, the plan may have some cracks. Thus, increasing tariffs on this mineral would increase the cost of electric vehicles manufactured in the US, at a time when Trump is threatening subsidies for the purchase of such cars. This would affect the competitiveness of North American automobile brands, and would leave room for Chinese manufacturers to continue strengthening their dominant position in that market globally.
Tesla wants to avoid competitive disadvantage
This was the conclusion that Tesla reached in 2019, when it obtained permits from Washington to obtain an exceptional license to avoid the 25% tariffs on imports of synthetic graphite that the Trump Administration established the previous year. Literally, the automaker noted that a rejection of its request would result in Tesla “a competitive disadvantage“In fact, Elon Musk’s firm requested more permits of this type again in February, pointing out that they had not been able to find alternative suppliers to the Chinese. Other companies that have also requested to operate without Washington’s tariffs have been LG and SK Battery America, firms that own battery factories in the states of Michigan and Georgia.
For their part, American graphite companies point out that 25% tariffs on the mineral are not enough to stop China’s intentional overproduction. According to the sector, Beijing’s objective is to distort the battery market through excess production, using subsidies so that manufacturers on Chinese soil can absorb Washington’s tariffs, at the same time lowering the final price of the product.
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