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The substance that constitutes a pencil lead and an important component of electric vehicle batteries is suddenly less available. China, the world’s top producer of graphite, will now require permits for shipments abroad. The country is the world’s top producer and plays a special role by refining 90 percent of the graphite used in electric vehicle batteries.
In what now seems like the ancient past, pencils were used to fill out bubble sheet forms and tests because the machines that read them did so by sensing the electrical conductivity of the graphite-filled ovals. (Today, optical scanners read such forms by sensing the reflectivity of the ovals.)
It is the conductivity of graphite which makes its so useful for electric vehicle batteries. China’s move would not be such a big deal if graphite were more evenly distributed around the world. But its production is overwhelming centered in China—which produces five times more than second-place Madagascar and 56 times more than either Canada or Russia which are tied for sixth place.
However, the United States, a center for electric vehicle manufacture, has no domestic source of graphite. All of it must be imported.
I have previously written about a rather small U.S. government initiative to increase domestic production of graphite and other critical new energy economy resources. But the effort seems woefully underfunded compared to the task at hand.
I have also previously made the argument that a resource doesn’t have to “run out” in order for it to become unavailable. It can simply become too costly for its intended purpose—either because it becomes too expensive to extract and refine and/or because those countries which produce it hold it back for their own use or to punish those they see as adversaries.
As countries become increasingly worried about having enough of the resources they need to reach their own goals for their economy and their environment, the desire to keep critical materials from going abroad will grow.
Earlier this year the Chinese reduced exports of gallium and germanium—two metals needed to make advanced microchips—after the United States banned the sale of advanced chips to China. As it turns out, the United States imports all of its gallium and more than 50 percent of its germanium. And, the lion’s share of those imports comes from a country in Asia whose name begins with “C.” Oh, what a tangled resource and logistics web we weave!
There is no clear end to this competition for increasingly coveted critical resources. And yet, the success of the new energy economy seems premised on the uninterrupted availability and affordable price of such resources. The recent Chinese action is only the beginning of a trend that few people understand as long term.
