New battery restrictions from China could affect the US.
The measures will take effect in November and could impact the American energy and technology industries.
247 - New restrictions on battery exports announced by China could have significant consequences for US companies, experts warn. The measure, which will take effect on November 8, aims to regulate a wide range of components in the battery supply chain, including large-scale lithium batteries, materials for cathodes and anodes, and even machinery used in battery manufacturing. China, which has already used rare minerals as a strategic tool in trade negotiations with Washington, is now using its dominant position in the battery industry as a new lever in trade talks between the two powers, reports [source missing]. Bloomberg.
The restriction could profoundly affect companies in the United States, especially at a time when the country is facing a growing demand for energy storage. This storage is essential for stabilizing the electrical grid and meeting the needs of... data centers, which are becoming increasingly demanding due to the growth of artificial intelligence. Matthew Hales, a supply chain and trade analyst at BloombergNEF, stated that while it doesn't affect as many industries as other Chinese trade restrictions, "China's dominance in battery supply chains means they can tighten the noose, and that could be felt quickly by US companies."
The new rules require battery companies to obtain licenses from China's Ministry of Commerce before exporting their products. This system allows Beijing to selectively control exports, a strategy that increases pressure on industries heavily reliant on these components. By 2025, large-scale lithium batteries, imported primarily from China, will account for approximately 65% of U.S. imports, according to the most recent BNEF data.
The installation of large-scale batteries in the United States has proven crucial to ensuring the stability of the electrical grid, especially as energy demand grows. From 2017 to 2023, electricity consumption by data centers increased by more than 100%, and this consumption is projected to triple by 2028, according to a study by Lawrence Berkeley National Laboratory. This increased demand is directly linked to the boom in artificial intelligence.
China, with its control over the production of key battery components such as anodes and cathodes, controls approximately 96% of the world's production capacity for these items. According to Cory Combs, director of critical minerals and supply chain research at Trivium China, the inclusion of these components in the new measures represents "a significant escalation," considering the heavy dependence on countries outside of China. Executive Celina Mikolajczak, who led battery manufacturing at Tesla and Panasonic, emphasizes that "all battery factories being built in the southeastern US will be impacted by this, as these are the raw materials."
The restrictions may also affect the stock market of companies that rely on Chinese components. On October 10, Fluence Energy's shares fell by more than 12%, while Tesla's shares also dropped by 5%, reflecting these companies' dependence on components sourced from China.
Denis Phares, CEO of Dragonfly Energy, a battery manufacturer, highlighted the added complexity that the Chinese measure brings to an already overburdened global supply chain. According to him, the company is actively working to reduce its dependence on Chinese components as part of its long-term strategy.
In addition to being a powerful tool in trade negotiations, the new Chinese restrictions also aim to consolidate the country's competitive advantage in the battery sector, a sector that plays a central role in the transition to clean energy sources. Ilaria Mazzocco, a specialist at the Center for Strategic and International Studies, commented that China has been explicit in its intention "not to surrender its core technologies," with the ambition of becoming the leading power in this sector in the coming decades.
The application of this export control policy may, however, have consequences for Chinese industry itself, which also benefits from foreign markets. Bryan Bille, a researcher at Benchmark Mineral Intelligence, points out that the growing dependence on external markets may hinder the full implementation of the new measures.
