While Military Rule and Impeachment Stir Up Noise... China Tightens Grip on South Korea's Battery Achilles' Heel 'Graphite' [Bojo, Battery]

China Controls Over 90% of Global Supply Chain
If Exports Are Banned, Korean Battery Production Will Halt

China is tightening its grip once again on the graphite and anode material supply chain, which is considered a 'vital point' in the Korean battery industry. Concerns are rising that the anode material supply chain could face another crisis if government support weakens amid the impeachment political turmoil.

POSCO Future M artificial graphite factory. Photo by POSCO

According to the battery industry on the 6th, the combined North American production capacity of the three battery companies operating from next year is about 479 GWh. It is expected that more than 470,000 tons of anode material will be required. Generally, 1,000 tons of anode material is needed per 1 GWh. Even considering that recent plant operating rates have dropped to the 50% range, the demand for anode material is expected to exceed 200,000 tons by a wide margin. Posco Future M, the only domestic producer of anode material, has a production capacity of about 82,000 tons, which is insufficient to meet the anode material demand in North America. Although the three domestic battery companies?LG Energy Solution, SK On, and Samsung SDI?receive some anode material supply from Posco Future M, most of their supply comes from Chinese companies. If China bans graphite exports to the U.S., factory shutdowns will be inevitable.

Graphite is the main raw material for anode material, a core component of batteries. Since anode material is calcined (heat-treated) at temperatures between 1500 and 3000 degrees Celsius, it consumes a lot of electricity. China’s electricity costs are about one-third of those in Korea, giving Chinese producers a significant price advantage. Chinese anode material is known to be approximately 40% cheaper than domestic products. The share of China in global anode material production increased from 87.5% in 2021 to 92.6% last year.

The Chinese government recently announced plans to restrict graphite exports to the U.S. again this year, following last year’s measures. This move is a response to the U.S.’s additional semiconductor sanctions against China. China has also formalized a policy to more strictly verify end users and usage when granting graphite export permits and to ban exports depending on the circumstances.

Posco Future M, regarded as the only domestic contender in the anode material supply chain, is facing a crisis of being stranded. The operating rate of Posco Future M’s Sejong anode material plant recently fell to the 30% range. Anode material sales dropped by half, from 51.7 billion KRW in the third quarter of last year to 24.6 billion KRW in the same period this year. Given this situation, Posco Future M has cut its anode material production target for 2026 from the original 221,000 tons to 113,000 tons, nearly halving it.

The government has yet to present a clear countermeasure for the anode material supply chain. On the contrary, industrial electricity prices have risen, making price competition even more difficult, and support measures such as production subsidies and tax credits have not been concretized. Additionally, there are concerns that industrial support policies have become even more distant due to the martial law political situation.

This content was produced with the assistance of AI translation services.