US set to impose 93.5% duty on China battery material
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 per cent, according to the American Active Anode Material Producers, the trade group that filed the complaint.
The anti-dumping duty on graphite is set to increase tensions along the global electric-vehicle (EV) supply chain that's already facing Beijing's export controls of some critical minerals and battery technology. Battery supplier shares slipped while North American graphite producers soared.
'Commerce's determination proves that China is selling AAM at less than fair value into the domestic market,' Erik Olson, a spokesperson for the anode producers trade group, said.
The tariff would be a blow to battery manufacturers, said Sam Adham, head of battery materials at consultancy CRU Group. A 160 per cent tariff equates to US$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 US President Donald Trump's budget bill, he said.
'That basically wipes out profits for one or two entire quarters for the Korean battery makers,' Adham said.
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Tesla and its key battery supplier, Japan's Panasonic, were among companies pushing to block the new tariffs, arguing that they rely on Chinese graphite imports because the domestic industry has not developed enough to meet the quality standards and volume that the carmaker requires. Tesla shares fell as much as 0.7 per cent on Thursday.
Graphite is a key raw material used to make anodes of the batteries, and nearly 180,000 tonnes of graphite products were imported into the US last year, with about two-thirds of these deliveries coming from China, according to BloombergNEF.
China dominates the processing capacity of graphite, with the International Energy Agency (IEA) calling the material one of the most exposed to potential supply risks and 'requiring urgent efforts for diversification', according to a report in May.
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.
The Commerce Department issued the preliminary determination affirming the anti-dumping duties in a document on Thursday, and said the final determination should be announced by Dec 5.
The tariff ruling 'provides the policy clarity and market signals needed to accelerate domestic graphite production', said Jon Jacobs, chief commercial officer at Westwater Resources, which is building a graphite plant in Alabama. Westwater, which has agreements with Jeep-owner Stellantis NV and South Korea's SK On, will have 12,500 tonnes of production capacity when its first phase comes online next year, with plans to expand capacity to 50,000 tonnes annually by 2028, Jacobs said.
Westwater rose 15 per cent on Thursday. Canadian graphite firms Nouveau Monde Graphite and Northern Graphite also surged on the tariff news.
The anti-dumping rate determination 'could impact the cost structure for battery suppliers' such as Fluence Energy and Enphase Energy, analysts at Roth Capital Partners said in a note on Wednesday. Fluence shares closed lower by 0.4 per cent while Enphase dropped 0.7 per cent.
Additional duties on batteries will add to the pressures facing the renewable industry. While energy storage retained key tax incentives in US President Donald Trump's budget bill, Treasury Department rules restricting the use of Chinese cells complicates compliance for many developers. Supply chain risks and costs will slow the pace of storage growth on the US grid, according to Wood Mackenzie. BLOOMBERG
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