By: Grayson Barlow
The escalating rivalry between the United States and China over national security concerns is now extending its reach into the realm of clean energy. Recently, China imposed export restrictions on three high-purity variants of graphite, a mineral that plays a critical role in manufacturing semiconductors, electronics, and electric vehicle (EV) batteries. These new regulations stipulate that Chinese companies must obtain government waivers to export these particularly valuable forms of graphite. This move—attributed to national security concerns—could exacerbate the global shortage of graphite, especially as the demand for EVs continues to surge worldwide. Coincidentally however, this action comes only days after the U.S. imposed new restrictions of their own on the export of computer chips to Chinese companies.
Taking a step back, graphite makes up about 20% of the mass of an EV battery, and according to the U.S. Geological Survey, approximately 65% of the world’s graphite production comes from China. More importantly, the country is said to control 90% of the world’s processing of the mineral. As far as critical minerals go, graphite is relatively straightforward and is often described as the “less attractive sibling of diamonds” – chemically, they’re both pure carbon, and both rely on pressure and temperature to be formed. It can be either mined from the Earth or synthetically produced by processing fossil fuels. While low-grade graphite finds applications in items as simple as a pencil, high-grade graphite is indispensable for two crucial purposes: (1) it is vital for the equipment used in semiconductor manufacturing, including those utilized in artificial intelligence, and (2) it forms the anodes—or negative electrodes—of lithium-ion batteries. Presently, China dominates both graphite production and processing, with these export restrictions targeting the export of highly pure forms of graphite.
These recent limitations are set against the backdrop of an intensifying U.S.– China trade war, and certainly weren’t unprovoked. Just a few days earlier, the United States had tightened restrictions on the export of certain semiconductors to China, measures that were initiated the previous year to safeguard U.S. technological supremacy by limiting China’s ability to domestically produce advanced semiconductors. These U.S. restrictions curtail the sharing of technology and intellectual property with China and prevented U.S. citizens or green-card holders from working on technology that could benefit China.
There is some contention regarding the effectiveness of U.S’s restrictions, given that China has announced the production of a 7-nanometer chip, a technology said to be a formidable adversary to U.S’s semiconductors. The importance behind this is that China is significantly less reliant on the United States’ exports than anticipated, as compared to the rest of the world’s reliance on China’s resources. According to Morgan Bazilian, a professor at the Colorado School of Mines, “you basically can’t build a lithium-ion battery without graphite, which means you can’t build an EV without graphite. . . . This is a lesson that China learned decades ago, when it invested heavily in graphite mining and refining.” While the country doesn’t have the world’s largest reserves, they have built the largest production capability, and now they’re using it to their advantage.
China’s recent restrictions on graphite exports are ominously close in timeline to U.S’s restrictions being implemented, and appear to be a direct retaliation to the American semiconductor restrictions. Their significance for the rest of the world remains uncertain. While these restrictions could lead to temporary price spikes in the short term; according to investor Alex Turnbull, Western graphite producers should be capable of increasing production to fill any supply gaps in the long run. In the eyes of leading EV automakers like Tesla and Rivian however, the hope for increased production capability isn’t the answer that is needed today to relieve the short-term repercussions posed by this trade war. The immediate setbacks are the possibility of EV production becoming extremely more costly, and in an emerging industry where high prices already cause consumer hesitation, the impacts of this standoff between countries could cause large setbacks to the United States’ green energy transition.
Although slim, the silver lining in this situation is that, unlike some other minerals, several American, Indian, and Japanese firms have already embarked on graphite manufacturing, many of whom saw their stock prices rise in response to these developments. Moreover, Tesla and Rivian are seeking their own alternative routes to break ground on graphite manufacturing facilities in an effort to mitigate reliance on both countries and their respective governments. Conversely, other automakers like GM, Mercedes-Benz, and Porsche, are banking on alternative materials like silicon for their next-generation batteries.
For now, these new restrictions set forth by both China and the United States, exist in a curious quantum state: They could be a big deal with a waterfall effect of repercussions, effectively altering the landscape of the global clean-energy economy, or they could quickly fizzle into a bureaucratic complication.
Student Bio: Grayson Barlow is a third-year law student at Suffolk University Law School set to graduate in May 2024. Grayson is receiving a dual degree with his masters in taxation through Suffolk’s Tax LLM program. Although a third year, Grayson was given the opportunity to be a staff member for the Journal of High Technology Law, where he aims to refine his legal writing and research abilities while enjoying the ride along the way.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
