How much impact will the optimization and adjustment of graphite export policy have on the industrial chain?

Graphite Alliance 2023-11-04 16:58 Published in Shanghai

Recently, the Ministry of Commerce of China has optimized and adjusted the temporary export control measures for graphite-related products, further standardizing the export of graphite materials and their products.

A reporter from "China Business News" learned from an interview that this graphite export policy adjustment, in addition to implementing export controls on the "three high" graphite products involved in aerospace, military industry, nuclear energy and other fields, also canceled five major types of carbon electrodes for furnaces. Temporary control of low-sensitivity graphite items used in basic industries of the national economy such as steel, metallurgy, and chemicals.

Sun Qing, honorary president of the China Carbon Industry Association, said that this time the Ministry of Commerce adjusted previous measures and included them in formal controls as necessary, and those used for national economic purposes were removed from the control list. This adjustment is beneficial to the development of the industry and the national economy.

Export policy optimization and adjustment

On October 20, information on the website of the Ministry of Commerce showed that in accordance with the relevant provisions of the "Export Control Law of the People's Republic of China", the Foreign Trade Law of the People's Republic of China, and the Customs Law of the People's Republic of China, in order to safeguard national security and interests, with the approval of the State Council, Decided to optimize and adjust the scope of items listed in the Announcement No. 50 of 2006 ("Decision to Implement Temporary Export Control Measures on Graphite Related Products") by the Ministry of Commerce, the State Commission of Science, Technology and Industry for National Defense, and the General Administration of Customs, and some items Implement export controls.

Among them, high-purity (purity>99.9%), high-strength (flexural strength>30Mpa), high-density (density>1.73g/cubic centimeter) artificial graphite materials and their products, natural flake graphite and their products (including spheroidized Graphite, expanded graphite, etc.) shall not be exported without permission. At the same time, the temporary control on five low-sensitive graphite items mainly used in basic industries of the national economy such as steel, metallurgy, and chemicals, including furnace carbon electrodes, has been lifted. The above policy will be officially implemented from December 1, 2023.

The reporter noticed that natural graphite (flake graphite, etc.) and most artificial graphite products (such as carbon brushes, electrodes, crucibles, heat exchanger graphite plates, solid lubricating materials, etc.) are good conductors of heat and electricity. High-purity graphite It has many uses in the semiconductor industry (that is, making semiconductor materials), and graphite is also a key material in the negative electrode of lithium batteries used in electric vehicles.

Currently, China is the world's largest graphite producer and exporter. According to statistics from the United States Geological Service (USGS), global natural graphite production will total about 1.3 million tons in 2022, of which China has long occupied the first place in the global natural graphite production rankings. China's natural graphite production in 2022 will be 850,000 tons, accounting for 65.38% of the global total production. At the same time, China also controls almost all graphite processing links and dominates every stage of the supply chain.

In recent years, with the rapid growth of the semiconductor and new energy automobile industries, the global demand for graphite has increased dramatically. Benchmark Mineral Intelligence (Benchmark), a British battery raw materials consulting company, predicts that graphite demand may increase eight times from 2020 levels by 2030 and 25 times by 2040. This means that graphite has a projected supply gap of 30%, compared with 11% for lithium, 26% for nickel and 6% for cobalt.

Regulation focuses on key areas

my country's export controls on graphite products began in 2006. At that time, the Ministry of Commerce and other national ministries and commissions adopted temporary export control measures, including graphite products, including graphite electrodes used in the steel industry and industrial silicon carbon electrodes, within the scope of control.

Sun Qing said in an interview with the media that according to export control regulations, domestic companies must obtain approval from the competent authorities when exporting controlled products. This reduces the efficiency of enterprises in expanding overseas markets to a certain extent and objectively affects the development of the industry. Therefore, we have communicated with relevant departments and believe that products related to national security and interests and the fulfillment of international non-proliferation obligations must be controlled, and other products can be considered for release.

Graphite products are widely used in military and aerospace fields because of their high temperature resistance. In addition to being used in civilian production, they are also widely used. In particular, high-purity graphite products have a wide range of application scenarios in the nuclear energy field.

A spokesman for the Ministry of Commerce said that in accordance with the provisions of the Export Control Law, the Chinese government conducted a comprehensive assessment of the temporary control measures for graphite items and made a decision to optimize and adjust both in and out, which reflects the control concept of coordinated development and safety and is conducive to more Properly fulfilling international obligations such as non-proliferation is conducive to ensuring the security and stability of the global supply chain and industrial chain, and better safeguarding national security and interests.

Sun Qing mentioned that the Ministry of Commerce’s adjustment of control measures is based on industry development and does not have any other considerations. This time, the Ministry of Commerce has adjusted previous measures and included formal controls where necessary, and those used for national economic purposes have been removed from the control list. This adjustment is beneficial to the development of the industry and the national economy.

The reporter noticed that this policy adjustment canceled the temporary control on five low-sensitive graphite items mainly used in basic industries of the national economy such as steel, metallurgy, and chemicals, including furnace carbon electrodes.

Industry insiders said that judging from the adjusted policy, the real strengthening of export control is mainly natural graphite, especially flake graphite in natural graphite, because this may involve applications in the military industry. For artificial graphite, instead of becoming stricter, export controls on graphite products in some fields have been relaxed; while controls on natural graphite have indeed increased.

Since natural graphite is produced by mining naturally occurring mineral deposits, the quality requirements for natural graphite ore are relatively high. The production process of artificial graphite cannot be compared with the production process of natural graphite, whether from the perspective of carbon emissions or green production. Therefore, under the global trend of pursuing green manufacturing, the industry prefers natural graphite.

From a global perspective, China has the largest reserves of natural flake graphite and the best quality. Since natural flake graphite is formed under special geological conditions over a long period of time, it is very precious and non-renewable. Therefore, the extensive development method is not suitable for the production and development of natural flake graphite.

What impact will it have on the business?

At present, my country occupies a dominant position in the field of graphite production and has formed a complete production system. However, from the perspective of business operations, in the first three quarters of this year, some graphite companies fell into the dilemma of "increasing revenue without increasing profits".

Among them, Fangda Carbon (600516.SH) achieved operating income of 3.877 billion yuan in the first three quarters of this year, a year-on-year decrease of 1.21%, and a net profit of 384 million yuan, a year-on-year decrease of 17.66%.

It is understood that Fangda Carbon is currently the largest supplier of graphite electrodes in China, and its customers mainly focus on the steel industry.

Regarding the adjustment of the graphite export ban, Fangda Carbon stated that the company's main carbon products are mainly used in steel companies, and only a small part of them are used in the field of new energy vehicles. After the adjustment of the export ban on graphite products, the export ban on graphite products in the metallurgical field was subsequently lifted.

In the long run, this will help improve the export market space and further expand overseas business.

Planet Graphite (688633.SH)’s business mainly focuses on graphite production equipment. In the first three quarters of this year, the company achieved operating income of 554 million yuan, a year-on-year increase of 23.61%, and net profit of 114 million yuan, a year-on-year increase of 6.46%.

Planet Graphite said that the company currently does not have many overseas projects. In the second half of this year, it will begin to set its sights on overseas markets, including Vietnam, India and other Southeast Asian regions, especially focusing on developing markets in countries that jointly build the "Belt and Road". For European and American high-end market companies, there are currently no plans to get involved. "The company is mainly engaged in the related industries of graphite equipment manufacturing. The graphite export ban has no impact on the company at present. If overseas graphite production capacity increases in the future, it will help the company expand overseas markets. However, there are many factors that need to be considered when conducting business overseas. Therefore, there are still some differences in terms of efficiency compared with domestic ones.”

In addition, Putilai (603659.SH), which focuses on the field of positive and negative battery materials for new energy batteries, achieved revenue of 11.688 billion yuan in the first three quarters of this year, a year-on-year increase of 2.4%, and a net profit of 1.629 billion yuan, a year-on-year decrease of 28.35%. .

Putilai explained in its financial report that the anode material industry is facing a periodic imbalance in the supply and demand environment due to sufficient production capacity and downstream battery customers entering the destocking stage. The industry is generally facing downward pressure on production capacity and price. In addition, the company's early high-cost anode inventory was consumed in the third quarter, which narrowed the gross profit margin of some of the company's anode material products. Coupled with the company's provision for inventory depreciation and other factors, the unit profit of the company's anode material products fell sharply.