Gabriel Friedman | Financial Post | Original Article

The North American Graphite Alliance on Thursday called on Canada to enact 25 per cent tariffs on six Chinese products used to make batteries, further amplifying trade tensions around the electric vehicle supply chain.

Graphite is used in lithium-ion battery anodes, and Canada produced around one per cent of the global total in 2022.

The trade group said it faces a “pivotal” moment before demand exponentially increases from the EV transition and that it needs protection from China.

“Tariffs must be placed on all graphite products from China to protect and stimulate the North American graphite industry,” it said in a letter to the Finance Department on Thursday, “and reduce the national security risks associated with depending on China for a vital material that is a necessary component of the clean energy transition.”

The trade group is composed of two Canadian junior miners, Montreal-based Nouveau Monde Graphite Graphite Inc. and Ottawa-based Northern Graphite Corp., as well as four companies based in the United States.

The U.S. has enacted 25 per cent tariffs on graphite products, which were included in a suite of protectionist trade measures announced in May by U.S. President Joe Biden on everything from electric vehicles to semiconductor chips to various critical minerals.

This summer, Canada partially aligned its trade policy with the U.S. by announcing 100 per cent tariffs on Chinese-made EVs and 25 per cent tariffs on Chinese aluminum and steel products.

Eric Desnauliers, chief executive of Nouveau Monde, said that adding 25 per cent tariffs on Chinese graphite would aid his company as it seeks to raise about $1.4 billion to build a graphite mine in Quebec.

He said graphite explorers have faced a more difficult pricing environment than those in the lithium market, where volatile pricing has allowed some junior mining companies to raise money during price spikes.

“Sadly, we did not have this (price spike) in graphite,” he said. “There’s no craziness that makes it easy to finance those projects.”

In 2022, China produced around 65 per cent of the world’s graphite, according to Statistics Canada.

But the North American Graphite Alliance said China produced 79 per cent of the natural graphite last year and 97 per cent of the synthetic graphite used in anode material, citing a study it commissioned by Oxford Economics Group Ltd.

“China’s complete dominance of the battery-grade graphite supply chain allows it to maliciously influence the global graphite market,” the trade group’s letter said.

It said a Chinese oversupply of natural graphite in 2023 caused prices to drop 18 per cent and synthetic prices to drop 24 per cent.

Across Canada, China’s dominance of the battery supply chain is increasingly being framed as a threat to national security.

On Thursday, Jonathan Price, chief executive of Vancouver-based Teck Resources Ltd., the country’s largest diversified miner, called China’s dominance of the critical minerals supply chain “staggering.”

He said the Organization of the Petroleum Exporting Countries (OPEC) at its peak in the 1970s controlled 40 per cent of the oil supply.

“With just that level of market control, OPEC’s oil embargo in the ’70s led to massive economic upheaval in the West,” he said in an address to the American Chamber of Commerce in Ottawa.

Also on Thursday, Natural Resources Minister Jonathan Wilkinson, during a fireside chat organized by the Toronto Region Board of Trade, said he feels “a great sense of urgency” to rectify the situation in the critical minerals sector.

“We are far too dependent on China right now in terms of critical minerals and their associated supply chains,” he said.