【Graphite】What Does the US Plan to Do After China's Graphite Ban?

China has banned the export of several critical minerals to the US, the latest move in a series of escalating trade restrictions between the world's two largest economies. By clearly cutting off, rather than merely restricting, access to materials of strategic importance to the semiconductor, defense, and electric vehicle industries, China has crossed a new line in the brewing trade war.

At the same time, China chose minerals that would not weaken any domestic industry, giving it sufficient leverage to inflict greater economic pain in response to any further trade restrictions that may be imposed by the incoming Trump administration. Graphite electrodes play an important role in the field of new energy due to their unique application principles, providing strong support for promoting the development and application of new energy technologies.

The adversarial trade plans of the incoming administration could slow the transition to cleaner industries, exacerbate inflation, and stall economic growth. The president-elect recently expressed interest in imposing an additional 10% tariff on all Chinese goods and proposed tariff rates as high as 60%-100% during his campaign. However, China dominates the supply chains of numerous critical minerals essential for high-tech industries, and it seems to be signaling a readiness for a tough counterattack.

"This marks China's capabilities," said Gracelin Baskaran, director of the Critical Minerals Security Project at the Center for Strategic and International Studies, a bipartisan research nonprofit based in Washington, D.C. "The shots have been fired."

• What prompted this decision?

Before China announced the ban, the Biden administration decided to further restrict the export of chips and other technologies that could help China develop advanced semiconductors for cutting-edge weapons systems, artificial intelligence, and other applications.

Throughout his presidency, Biden implemented a series of increasingly aggressive export controls aimed at curbing China's military strength, technological advancement, and growing economic power. But Cory Combs, associate director at research firm Trivium China, stated that the latest controls threaten China's ability to protect national security or transition to producing more advanced technologies, "which is clearly a red line for China."

"This largely indicates where Beijing sees its interests," he said.

• How might the ban impact climate technologies?

China indicated it might further restrict the sale of graphite, as most of the material used for lithium-ion battery anodes in electric vehicles, grid storage devices, and consumer electronics is graphite.

Tightening graphite restrictions could have a significant economic impact on US battery and electric vehicle manufacturers, partly due to the limited availability of alternative sources. According to the International Energy Agency, China controls about 80% of global graphite production and about 70% of graphite processing.

"This is a big deal for batteries," said Seaver Wang, co-director of the climate and energy team at the Breakthrough Institute. "By weight, graphite is needed in far greater quantities per terawatt-hour than nickel, cobalt, or lithium. And the US essentially has no operational production."

In the US, any action that increases the cost of electric vehicles risks slowing the shift away from gas-guzzlers, as high prices remain the biggest barrier for many consumers.

• In response, the US made this choice

On December 5, 2024, the US Department of Defense published an article titled "DoD Uses the Defense Production Act to Stimulate Critical Supply Chains" by Major Wes Sinego. The article noted that for decades, the US has been almost entirely dependent on foreign sources of graphite, a key component of batteries that power electric vehicles, military energy systems, and other core technologies of modern life. China produces 77% of the world's graphite and refines over 90%, dominating the market. As geopolitical tensions rise, this dependence has become a glaring vulnerability, prompting the Department of Defense to adopt strategic measures in response to urgent security challenges.

According to the article, the BamaStar Graphite Project and the Graphite Creek deposit are central to efforts to rebuild American graphite production—an endeavor critical for military lithium-ion batteries. Supported by Defense Production Act (DPA) funding, these projects are part of broader efforts to address weaknesses in the defense industrial base that leave the US vulnerable to supply chain disruptions and adversarial influence.

The US has already taken steps to secure graphite supplies. In February 2021, Biden's Executive Order 14017 facilitated a comprehensive review of critical supply chains, with graphite emerging as a standout concern. China's 2023 export restrictions on graphite heightened the urgency, delivering a shock to industries reliant on the mineral and underscoring the Pentagon's efforts to mitigate risks.

Under Title III of the DPA, the Department of Defense has allocated funding to the BamaStar Graphite Project, which received a $3.2 million investment for a feasibility study to establish a fully domestic graphite production pipeline. Meanwhile, the largest known graphite deposit in the US, Graphite Creek in Alaska, was awarded $37.5 million to accelerate the development of a vertically integrated supply chain, including advanced manufacturing and recycling.

These investments reflect the Department of Defense's strategic shift in supply chain security, moving beyond stockpiling raw materials to building infrastructure, partnerships, and policies that ensure sustained resilience.

Reportedly, these investments are already yielding results. The $37.5 million investment in Graphite Creek under the DPA facilitated plans for a $435 million processing facility and spurred private sector interest and innovation in other critical industries, such as rare earth magnets and microelectronics.

Assistant Secretary of Defense Taylor-Keel stated, "Graphite is critical for defense, and today's investments are about ensuring tomorrow's resilience and security."

In a speech at last summer's Select USA Investment Summit, Deputy Secretary of Defense Kathleen Hicks emphasized the Department's determination to maintain resilience, stating, "We are more concerned about supply chain security and resilience than ever before."

This substantial US investment in graphite projects may be seen as a choice to counter potential "chokeholds" from China. Against the current backdrop, as the global economy continues to develop and the new energy industry booms, the strategic value of graphite resources will become even more prominent. Ensuring the healthy and stable development of the graphite industry will be a critical topic for the international graphite market in the future.

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