China’s controls on graphite exports ‘a loud wakeup call’ for the US, says Graphex CEO

China announced last month it will require export permits for some graphite products in another bid to control critical mineral supply in response to challenges over its global manufacturing dominance.

Graphex Technologies – among the top 10 global suppliers of specialized spherical graphite to the EV and renewable energy industries – used the export control announcement to reiterate its mine-to-battery global strategy to deliver necessary anode material to meet the needs of North American automakers and battery manufacturers.

“The announcement to place controls on graphite exports is a loud wakeup call and a national security issue for the U.S. and Canada, plain and simple, and we have been preparing for this,” Graphex CEO John DeMaio said at the time.

In an interview, DeMaio noted that the move was not surprising.

“We always knew that there was the potential for some kind of a flex by China, given a lot of the tensions over the last year,” he said.

“Just the fact that the Chinese ecosystem for electric vehicles and lithium-ion batteries is so far ahead of everybody else in the world, the demand over there is huge.

“Those deposits of graphite in China, [they] mine and process it, consume it all intramurally and that we can see coming from a mile away and then you add in any kind of geopolitical tension and yes, it was not inevitable but not surprising that it happened,” he said. “I think it was just surprising that it happened without any kind of notice.”

Graphex Technologies, a U.S. subsidiary of Graphex Group Ltd., a Cayman Island company, already has a self-contained graphite processing ecosystem in China. Its graphene division currently produces 10,000 tonnes per year of purified spherical graphite at its facility in Heilongjiang Province.

Last year, the company established a Graphex-Michigan joint venture when it invested $75 million to buy a former automotive plant in Warren, with plans to turn it into a graphite processing plant. In June, Graphex secured the environmental permit for the facility from the Air Quality Division of the Michigan Department of Environment, Great Lakes, and Energy.

China’s grip on graphite

China is the world’s top graphite producer and exporter. It also refines more than 90% of the world’s graphite into the material that is used in virtually all EV battery anodes. Benchmark Mineral Intelligence sees demand for graphite over the next decade growing at an annual compound rate of 10.5% but supply will lag, it says, expanding at only 5.7% per year.  

While there is a need for 200,000 tonnes of graphite to meet demand, the reality is, the current U.S. supply capability is zero. 

Northern Graphite this month reopened North America’s only producing graphite mine, Lac des Iles in Quebec, after placing it on care and maintenance during the second and third quarters of this year due to challenging market conditions and prices for its products.

Expanding partnership portfolio

Graphex now has global offtake agreements with Syrah Resources (ASX: SYR), owner of the Balama mine in Mozambique, the world’s largest graphite producing facility; with Northern Graphite (TSXV: NGC) to aggregate raw material in Canada and Namibia; South Star Battery Metals (TSXV: STS), for supply from both Brazil and the United States, through the Santa Cruz graphite project and the Ceylon project; with Volt Resources (ASX: VRC) to provide graphite from its Bunyu Graphite project in Tanzania; with Gratomic (TSXV: GRAT) for the natural graphite from its Aukam project in Namibia; and with Reforme Group to provide material from its secured mineral deposits across Australia.

“We’ve been planning to expand and diversify long before a lot of this sentiment really kicked in — before the IRA,” DeMaio said. “We had already announced our plans to build plants here in North America and to diversify the upstream supply. It just made sense to get raw materials closer to the shore as we could —even onshore whenever possible.”

DeMaio pointed to graphite deposits in Alabama, owned by Westwater Resources and South Star battery Metals as potential future domestic supply.

“We anticipate that it’s going to obviously cause more focus to be put on domestication of supply… and accelerate our plans to build out more infrastructure here, more processing capabilities.”

“Even though we have operations in China — we’re not a Chinese company. We’re looking at ways to separate or to create a standalone entity,” he said. “It validates our strategy. We need to be building plants that will accommodate 50,000 or 100,000 [tonnes] of volume both up in Canada and also down here in the lower 48.”