China’s Use of Graphite Export Restrictions Encourages Diversification

Earlier this month, China announced new export controls on graphite, a material that is used in batteries, fuel cells, and nuclear reactors. The controls were introduced on “national security” grounds and will require special export permits for three grades of graphite. In 2021, China produced 79.1 percent of the world’s natural graphite, despite only having 22 percent of global reserves.

This announcement could have significant ramifications for the United States. In 2021 the United States was 100 percent important reliant for graphite and a third comes from China. Graphite supply risk has been flagged as high in both the short and medium term. The export restrictions came on the back of significant forecasted increases in demand. The likelihood of disruptions from Beijing has escalated U.S. efforts to diversify graphite sourcing. The Department of Energy noted that although China accounted for 66 percent to 82 percent of global production between 2017 and 2021, Tanzania and Mozambique are expected to become significant producers within the next few years. Mozambique and Tanzania have the fifth- and sixth-largest reserves of graphite, respectively. The United States has increasingly turned to these African countries to improve security of graphite supply.

The U.S. government is putting financial support behind efforts to diversify graphite sourcing. In September, the U.S. International Development Finance Corporation’s board of directors approved a $150 million loan to fund a graphite mining operation in Balama, Mozambique. The graphite will be sent to a Syrah’s processing facility in Louisiana, which received a $102.1 million loan from the U.S. Department of Energy’s Loan Programs Office earlier this year. It produces graphite-based active anode material, a key material used in lithium-ion batteries.

Tanzania also entered into a landmark deal with three Australian companies earlier this year. The firms signed $667 million in agreements to develop graphite and rare earth minerals projects. This follows another deal with Walkabout Resources, an Australian company, to develop the Lindi Jumbo project. Lindi Jumbo has the highest reserves—and with desirable large flake size—of any undeveloped graphite project in Africa and is the second-highest margin graphite project in the world. By 2030, Tanzania is expected to produce 11.4 percent of the world's graphite. The involvement of Australian firms is beneficial to the United States given the two nations’ free trade agreement.

The United States is also looking to build domestic exploration and production of graphite. In 2021, the United States had less than 1 percent of known global graphite reserves. But in 2022, a significant reserve of graphite, Graphite Creek, was identified in Alaska, with over 10 million metric tons of ore with an ore grade of 7.8 percent to 8 percent.

The Department of Defense awarded $37.5 million to Graphite One, a Canadian company, through the Defense Production Act. Graphite One will put in another $37.5 million to support fast-tracking a feasibility study that can move along a production decision.

It is likely a proliferation of deals will materialize with countries in Africa, South America, and Central Asia as the United States seeks to reduce its reliance on China for key critical minerals, particularly those for which the United States is wholly import reliant. Disruptions can be costly for both national and energy security and given the lag from exploration to production, such investments will occur with a greater sense of urgency.

Gracelin Baskaran is research director and senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C. 

Director, Project on Critical Minerals Security and Senior Fellow, Energy Security and Climate Change Program