US tariffs on Chinese graphite spark opportunity for India's Epsilon
The U.S. in July imposed a punitive 93.5% tariff on import of graphite anode materials from China, creating an opportunity for India's Epsilon to break Beijing's monopoly on supplies of the key battery component.
Indeed, U.S.-based battery makers are eager to secure alternative suppliers as the higher levies disrupt supply chains and stoke uncertainty, including over future price rises.
Vikram Handa, managing director of Epsilon, which makes graphite anode materials for EV batteries, expressed confidence over some new supply deals.
"Last month, they were saying let's wait and see how things go. Now we think in the next 60 to 80 days, we will close our contracts," said Handa.
Epsilon, which announced plans for a $650 million factory in North Caroline in October 2023, has been working on getting permits and environmental clearances, while waiting for firm orders before putting a shovel in the ground.
"The numbers now start making sense for customers to buy from the U.S.," said Handa, adding that the plant, which will have capacity of 30,000 tonnes of anode materials, is expected to be up and running by mid-2027.
An EV battery is made up of four components - anode, cathode, electrolyser and separator. The anode contributes to fast-charging and vehicle range.
The U.S. needs 500,000 tonnes of anode materials a year for its EV and energy storage battery needs, which were met largely by China, which refines over 90% of the world's graphite into the material used in almost all EV battery anodes.
Mumbai-based Epsilon also has plans to invest over $1.1 billion in a 100,000-tonne anode materials facility in India's Karnataka state, but has yet to see serious interest in India.
Handa said low Chinese prices were a draw for Indian companies, but he was trying to persuade them to buy at least 20% from Epsilon, so that "if China closes the tap," they had an alternative supplier.
"If it is zero (demand for Epsilon's anodes) right now, how will I put up a plant?" he asked.
"I hope this rare earth story doesn't play out the same way for battery materials," given Indian companies dependence on them, he said.
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Digital Services and Software: Local IT companies and freelancers regularly purchase software, cloud tools, online courses, and other digital services from international providers. Without smooth outbound payments, these businesses struggle to stay competitive. Tuition Payments: In 2024, around 60,000 Bangladeshi students went abroad for higher education, more than double the 26,112 recorded in 2014. With an estimated 106,000 students currently studying abroad, outbound tuition payments have reached about USD 2 billion. Healthcare: According to the Daily Star (Dec 2024), approximately 350,000 Bangladeshis travel abroad annually for medical treatment, primarily to India, Thailand, and Singapore. These healthcare-related outbound flows amount to roughly USD 3 billion each year. Travel (Including Hajj & Umrah): Each year, 2 million Bangladeshis travel abroad for tourism, spending more than USD 1 billion. Additionally, 100,000 travel for Umrah and 90,000 for Hajj. Religious travel alone contributes USD 600 million in outbound payments. Remittance from Expatriates in Bangladesh: With approximately 150,000 expatriates working in Bangladesh, outbound salary and savings transfers amount to about USD 1 billion annually. Although these categories are recognized by Bangladesh Bank, inefficiencies, excessive paperwork, and limitations imposed by legacy correspondent banking arrangements often make formal channels unattractive. Consequently, businesses frequently turn to informal networks such as hawala. Why Efficient Outbound Payments Are Crucial Easing legitimate outbound transfers would yield several benefits: For SMEs and Traders : A small textile factory importing fabric from China could make payments smoothly through banking channels, avoiding hawala. This transparency builds trust with suppliers and ensures compliance. Without efficient official channels, businesses often resort to informal networks for quicker transactions. : A small textile factory importing fabric from China could make payments smoothly through banking channels, avoiding hawala. This transparency builds trust with suppliers and ensures compliance. Without efficient official channels, businesses often resort to informal networks for quicker transactions. For Freelancers and IT Firms : Instant payments for software or cloud services enhance productivity, competitiveness, and revenue generation. Without efficient payment systems, freelancers often rely on third parties with international accounts, further fueling the informal market. : Instant payments for software or cloud services enhance productivity, competitiveness, and revenue generation. Without efficient payment systems, freelancers often rely on third parties with international accounts, further fueling the informal market. For Individuals: Students, patients, and travelers could make payments without facing delays or overpaying in the open market. For instance, parents may need to urgently send tuition or living expenses to universities abroad, and patients may need to pay for medical treatments. Ultimately, every outbound transaction conducted through official channels is one less for hawala networks, making it harder for them to operate. How Tight Outbound Controls Can Unintentionally Boost Hawala and Affect Inbound Remittances Regulators often impose strict controls on outbound payments to preserve foreign currency reserves, which are crucial for paying for urgent imports like fuel, food, and medicine. While this strategy may seem logical in the short term, it creates a chain effect that harms the economy over time. Think of Bangladesh's cross-border financial flows as two interconnected buckets—one for Taka inside Bangladesh and one for foreign currency outside. When outbound payments through legal banking channels are restricted: Outbound Demand Shifts to Hawala Networks: The unmet demand for outbound payments doesn't disappear; it simply shifts to informal channels like hawala. Students, businesses, and families still need to send money abroad. When banking channels are slow or limited, they turn to hawala. Foreign Exchange Market Distortion: Hawala creates artificial demand for foreign currency in the open market while increasing demand for Taka abroad. This creates pressure on both the local currency and the foreign exchange market. Inbound Remittances Get "Netted Off": Hawala operators balance their books by matching outbound and inbound transfers, leading to a "net-off" effect. As a result, some inbound remittances that should flow through formal channels are instead settled off the books. Banking System Loses Credibility and Reserves Stay Weak: Even if foreign reserves seem protected in the short term, reduced formal inflows mean the country ultimately loses more than it saves. The Bottom Line: Strict outbound controls can reduce formal inbound remittances because hawala "nets off" the two-way flow of money. What Easing Outbound Payments Could Look Like Create a Simple 'Personal Outward Remittance' System: Allow residents to send a modest annual amount (for education, medical expenses, small family support, subscriptions) fully digitally, using e-KYC, e-documents, and internal banking portals. Simplify Documentation: Bangladesh Bank already lists permissible categories. A one-page checklist per use case (e.g., tuition fees, hospital deposits) could streamline the process, accepting digital invoices and allowing post-verification for smaller amounts to ensure urgent payments aren't delayed. Transparent Pricing: Require banks to disclose fees and exchange rate margins upfront, aligning with G20 targets for fair and affordable remittances. Expand Beyond SWIFT: Allow banks to connect with regulated global fintech networks such as Euronet's 'Dandelion Payments', enabling faster settlement times, lower transaction costs, and greater transparency and compliance. SWIFT is crucial for big, complex payments, but retail-size transfers often move faster and cheaper through purpose-built networks that connect to bank accounts, cards and wallets with end-to-end tracking. By diversifying beyond SWIFT, Bangladesh can modernize its payment infrastructure and keep pace with global trade. Join Regional Cross-Border Payment Networks: Many countries, under government-to-government collaborations, have integrated their national payment systems. For instance, countries like Singapore, Malaysia, Thailand, India, and Indonesia have developed 'Nexus,' a centralized payment system to enhance efficiency in cross border payments outside of SWIFT system. Bangladesh could explore similar initiatives for improved cross-border payments in prefered corridors. Lessons from Other Countries Countries with similar foreign exchange policies have already benefited from easing outbound flows: India : The Liberalized Remittance Scheme (LRS) allows Indians to send up to USD 250,000 annually for education, travel, business, or investments, reducing the pressure on informal channels. : The Liberalized Remittance Scheme (LRS) allows Indians to send up to USD 250,000 annually for education, travel, business, or investments, reducing the pressure on informal channels. Thailand: Thailand has gradually liberalized outbound remittances for both individuals and corporates, making payments cheaper and faster, which supports SMEs and exporters. What Success Would Look Like When governments ease and digitize legitimate outbound payments, three positive outcomes occur at once: People return to formal banking : It becomes easier and safer than using hawala. : It becomes easier and safer than using hawala. More inbound remittances through banks : Less 'netting off' as hawala loses its outward leg. It becomes harder for it to source dollars/taka and to match cross-flows : Less 'netting off' as hawala loses its outward leg. It becomes harder for it to source dollars/taka and to match cross-flows Lower open-market pressure: As legal outbound payments rise, demand in the open market decreases. Better data for policy-making: Clean data allows Bangladesh Bank to fine-tune foreign exchange liquidity, incentives, and compliance. Besides, Regulators see the flows, which improves risk control and macro planning. Lower costs over time: Competition between banks and fintech companies drives fees closer to the G20 target (≤3%). Global bodies push in the same direction—because cheaper, faster, clearer payments shift people toward formal rails. The Bigger Picture Inbound Remittance and Reserve Growth: Bangladesh currently receives around USD 30 billion in annual remittances. With an open and trusted system, this could grow by 50%, reaching USD 45 billion by 2025. Growing Bangladesh's Cross-Border Payment Industry: Strengthening outbound payment channels fosters innovation, reduces costs, and enhances customer experience. This positions Bangladesh as a competitive player in the region and attracts global fintech investment, boosting public-private sector collaborations. Moreover, growing both inbound and outbound cross border payment industry in Bangladesh will allow local and international fintech to partner with banks for seamless payment solutions. This development will enhance regional financial integration, boost remittances, and stimulate economic growth, positioning Bangladesh as a significant partner in regional and global payment industry. Conclusion: A Smart Liberalization Strategy People don't choose hawala because they prefer informality; they turn to it when the formal system is difficult, slow, or expensive. If Bangladesh can make the Banking path easier, faster, and more affordable, individuals and businesses will naturally prefer to use banks. This means creating clear regulations, simplifying digital paperwork, integrating modern payment networks alongside SWIFT, and ensuring transparent pricing. By doing so, Bangladesh can boost formal financial transactions, allowing money to flow through banks even as people legally send payments abroad. Rather than seeing outbound payments as a "drain" on reserves, Bangladesh should recognize them as part of a two-way financial flow. By simplifying and digitizing legal outbound transfers, the country can: Reduce reliance on hawala networks, Increase inbound remittances through official banking channels, Strengthen reserves sustainably, Empower SMEs, freelancers, and individuals to expand globally, Stimulate growth in the cross-border payments industry. This approach will create a healthier, more transparent financial system that supports long-term economic growth and stability.
