New regulations on graphite exports have limited impact on the industry

Recently, the Ministry of Commerce of China, together with the General Administration of Customs, issued an announcement on optimizing and adjusting the temporary export control measures for graphite items, announcing that they will decide to implement the Ministry of Commerce, the State Commission of Science, Technology and Industry for National Defense, and the General Administration of Customs Announcement No. 50 of 2006 ("Decision on Graphite Export Control Measures"). The scope of items listed in "Implementing Temporary Export Control Measures for Related Products") will be optimized and adjusted, and export controls will be implemented on some items. The new policy will be implemented from December 1, 2023.

China is the world's largest graphite producer and exporter. Driven by the substantial growth in the global installed capacity of new energy vehicles and power batteries, the demand for graphite in domestic and foreign markets has increased significantly, and artificial graphite has increasingly become the mainstream anode material for power batteries.

On October 23, reporters from The Paper learned from Beterui and Co., Ltd., the domestic leaders in power battery anode materials, that the new export control regulations for graphite items issued by the Ministry of Commerce and the General Administration of Customs and about to be implemented will affect graphite anodes for power batteries. Materials products have limited business impact. Among them, the company made it clear that the new control policy will have no impact on the company’s current export business of artificial graphite material products.

Specifically, the announcement clarified that items that meet the following characteristics must not be exported without permission. One is high-purity (purity>99.9%), high-strength (flexural strength>30Mpa), high-density (density>1.73g/cubic centimeter) artificial graphite materials and their products (reference customs commodity numbers: 3801100030, 3801909010, 6815190020 ); the second is natural flake graphite and its products (including spheroidized graphite, expanded graphite, etc.). (Reference customs commodity numbers: 2504101000, 2504109100, 3801901000, 3801909010, 3824999940, 6815190020).

In terms of artificial graphite, it is reported that first of all, the parameters of artificial graphite materials and products controlled in the new regulations are not conventional indicators of artificial graphite for lithium battery anode materials. They are mainly products such as graphite sheets and graphite blocks, and are more targeted at aviation. Graphite items used in high-precision fields such as military industry and so on.

The company's website page also shows that the compaction density of the company's current artificial graphite pole products is basically between 1.5 and 1.7 grams/cubic centimeter, which is lower than the requirements of this announcement.

Secondly, since this adjustment is an optimization of the existing export control policy, currently most power battery anode material companies have artificial graphite export licenses.

According to No. 50 of 2006 ("Decision to Implement Temporary Export Control Measures on Graphite Related Products"), there are 7 graphite items under export control, including "other artificial graphite", "other graphite or other carbon-based materials" "Products", "Other Carbon Electrodes", "Lamp Carbon Rods, Battery Carbon Rods and Other Graphite Products", etc.

In comparison, for artificial graphite, three batch numbers have been refined for this export. According to industry insiders, anode material companies with overseas business have previously applied for export licenses normally.

Therefore, this regulatory adjustment is more about natural graphite. Specifically, the new policy adds six natural graphite batch numbers to the export license requirements.

It is understood that natural flake graphite and its products are mostly used in advanced refractory materials and coatings widely used in the metallurgical industry, stabilizers for pyrotechnic materials in the military industry, and can also be used in electrodes in the battery industry. Among them, expanded graphite produced through in-depth processing of flake graphite has high military application value because of its ability to absorb electromagnetic waves.

At present, China dominates the global supply of lithium battery graphite. In recent years, Chinese companies have successfully achieved "Japan and South Korea substitution" in the market. According to Xinchen data, China's graphite anode output in 2022 will be 1.415 million tons, accounting for 96% of the global proportion.

Among graphite anode products, although natural graphite has advantages in cost and specific capacity, its cycle life is low and its consistency is lower than that of artificial graphite. Therefore, artificial graphite is dominant in the field of power batteries and high-end consumer batteries. According to data from the Advanced Industrial Research Institute (GGII), China's artificial graphite shipments will account for approximately 84% in 2022, and it has become a mainstream product in the anode material market in recent years.

Therefore, Guojun Dianxin’s analysis pointed out that under the stimulus of demand, after the implementation of the New Deal, the possibility of short-term overseas customers increasing delivery inventory cannot be ruled out.

It is worth mentioning that as overseas customers consider the safety of the nearby supporting supply chain, domestic anode leading companies such as Beterui, Putilai, and Shanshan Co., Ltd. have also begun to establish anode production capacity overseas.

On October 16, Betri signed an agreement in Indonesia to jointly invest with Singaporean Stellar Company to build a lithium battery anode material production base with an annual output of 80,000 tons in the IMIP Park in Central Sulawesi Province and the KIP Park in Central Java Province, Indonesia. The investment in the first phase of the project is US$478 million.

Previously, on September 27, Shanshan Co., Ltd. announced that its subsidiary Shanghai Shanshan would invest no more than 1.28 billion euros in Finland to build an integrated base project for lithium-ion battery anode materials with an annual output of 100,000 tons in Finland. The production capacity of the two phases of the project is planned to be 50,000 tons/year each, and the construction period is expected to be 24 months each.

In May previously, another domestic anode material leader, Putilai, also announced that the company plans to build a 100,000-ton integrated production and R&D base for lithium-ion anode materials in Sweden. The total investment in the project is expected to be approximately RMB 10.677 billion.

When announcing the investment announcement, all three companies unanimously stated that overseas projects will further expand and serve the company's overseas customers, improve the company's overseas production capacity layout, increase the company's market share of anode materials, and increase the company's overall future earnings.