US Set to Impose 93.5% Tariff on Battery Material From China

Graphite ore at the Nouveau Monde Graphite Matawinie Mine in Saint-Michel-des-Saints, Quebec, Canada, on Thursday, Oct. 6, 2022. Nouveau Monde Graphite Inc. bought a site in Becancour for a C$923 million plant that could start producing battery materials in three years -- providing it can raise enough money to build facilities. Photo by Renaud Philippe /Bloomberg

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(Bloomberg) — The US Commerce Department imposed preliminary anti-dumping duties of 93.5% on Chinese imports of graphite, a key battery component, after concluding the materials had been unfairly subsidized.

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A trade association representing US graphite producers in December filed petitions with two federal agencies, asking for investigations into whether Chinese companies were violating anti-dumping laws. The new duties will add to existing rates making the effective tariff 160%, according to American Active Anode Material Producers, the trade group that filed the complaint. 

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The anti-dumping duty on graphite is set to increase tensions along the global electric-vehicle supply chain that’s already facing Beijing’s export controls of some critical minerals and battery technology. It could also impose significantly higher costs on automakers, who rely on the material to make electric cars. 

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The tariff would be a blow to battery manufacturers, said Sam Adham, head of battery materials at consultancy CRU Group. A 160% tariff equates to $7 per kilowatt-hour added cost to an average EV battery cell, or one fifth of the battery manufacturing tax credits that originated in the Inflation Reduction Act and survived President Trump’s budget bill, he said.

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“That basically wipes out profits for one or two entire quarters for the Korean battery makers,” Adham said.

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Tesla Inc. and its key battery supplier, Japan’s Panasonic Inc., were among companies pushing to block the new tariffs, arguing that they rely on Chinese graphite imports because the domestic industry hasn’t developed enough to meet the quality standards and volume that the carmaker requires. Tesla shares fell as much as 1.4% Thursday.

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Graphite is a key raw material used to make anodes of the batteries, and nearly 180,000 metric tons of graphite products were imported into the US last year, with about two-thirds of these deliveries coming from China, according to BloombergNEF.

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China dominates the processing capacity of graphite, with the International Energy Agency calling the material one of the most exposed to potential supply risks and “requiring urgent efforts for diversification,” according to a report in May.

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Graphite is expected to remain the most common anode material for all types of lithium-ion batteries in the medium term, according to the IEA, with silicon only expected to begin eating into its market share from 2030. 

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The Commerce Department issued the preliminary determination affirming the anti-dumping duties on a document Thursday, and said the final determination should be announced by Dec. 5.

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—With assistance from Ted Mann.

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(Updates with additional information and analyst comment from third paragraph.)

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