EV manufacturers and traders are facing an increasingly complex global tariff landscape, according to data on EV tariffs compiled by Fastmarkets.  

The information, spanning multiple countries, shows tariffs ranging from 0% to potential highs of 100%, reflecting diverse national strategies towards EV adoption and trade. 

Impact on US Section 301 on Chinese EV imports

Several major economies are tightening restrictions on EV imports, particularly those from China.  

The United States is considering a sharp increase in tariffs on Chinese EVs from the current 25% to 100% under Section 301. 

This potential move comes while the EU had proposed brand-specific tariffs on EVs produced in China, varying from 9% for Tesla to 36.3% for SAIC and other non-cooperating brands.  

Changes to these proposed rates were recently reported, suggesting Tesla’s tariff rate may drop to 7.8%, while BYD’s rate remains unchanged at 17%. Geely could see a slight decrease to 18.8% from the initially proposed 19.3%. The peak rate of 35.3% would still apply to SAIC and other companies not cooperating with the EU investigation. 

“These targeted approaches by the US and EU signal a shift towards more protectionist policies in the EV sector,” Georgi Georgiev, data analyst at Fastmarkets, said. “It’s likely to have significant implications for global EV trade flows and production strategies.” 

In contrast, India has implemented a conditional tariff reduction. The country has lowered duties to 15% for EVs priced $35,000 and above, but with specific requirements for manufacturers. Companies must establish local production facilities within three years and achieve 50% localization of components by the fifth year. This localization target means that half of the EV’s components must be sourced or manufactured locally, ensuring significant investment in India’s automotive sector. 

Differing approaches around Free Trade Agreements 

The impact of Free Trade Agreements (FTAs) on EV tariffs is substantial. Thailand, for instance, applies a 0% tariff on EVs from FTA partners, while non-FTA imports face a 60% duty.  

Other countries are using temporary measures to boost EV adoption. Indonesia has waived import taxes until 2025, and Malaysia is offering zero-duty rates until December 2025.  

In contrast, Brazil is gradually increasing its EV tariffs, planning to reach 35% by 2026 from the current 18%. 

Regional variations are evident, with the Association of Southeast Asian Nations (ASEAN) countries generally lowering tariffs, while some Western nations implement stricter measures.  

Australia removed its 5% EV duty in July 2022, while Canada plans to impose a 100% tariff on imports of China-made electric vehicles starting October 1, 2024. 

EV market growth vs. protectionist policies 

These policy shifts are occurring against a backdrop of rapid growth in the global EV market. 

“The evolving tariff landscape, coupled with recent market data, paints a complex picture,” Phoebe O’Hara, energy storage systems senior analyst at Fastmarkets, said. “While we’re seeing growth in some areas, particularly in hybrid vehicles, the decline in BEV market share in key regions like the EU suggests that tariffs aren’t the only factor at play. Manufacturers and suppliers are likely to face challenges in balancing production strategies with shifting consumer preferences and policy environments across different markets.” 

This range of tariffs demonstrates different motivations and raises questions about who the ultimate beneficiaries are, according to sources.  

“[Tariffs are] all means of trying to increase competition artificially in an attempt to play fire with fire,” a trade association representative from North America told Fastmarkets. “Ultimately that’s not going to work because the whole world is bigger than any two binary opposites.” 

“[The tariff] supports producers, but does that really support the industry as a whole?” they said. “The tax on those tariffs on the EVs [are] taking up the affordable market, ultimately that is a tax on consumers.”  

Keep up to date with global EV market insights and predictions for the remainder of 2024 and beyond. Gain access to more data and analysis when you get in touch today.

The post Global EV tariff tracker 2024: Exploring import duties and trade policies appeared first on Fastmarkets.

The proposed rules by the DOE state that companies “owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation” would be designated as a FEOC. This means that any company operating within China will be automatically considered a FEOC under the jurisdictional criteria.

Over the past five years, anode material imports to US have risen by a compound average growth rate (CAGR) of 24% to over 58,000 tonnes in 2023 from around 20,000 tonnes in 2019 in response to increasing EV demand and a growing number of battery plants in the US. Since 2020, China accounts for close to 100% of total anode shipments to the US, of both natural and synthetic graphite anode material. China’s dominance of the sector exceeds its own borders, since even natural graphite anodes producers in South Korea and Japan import spherical graphite raw material from joint ventures in China.

If the proposed FEOC rules are applied, almost no batteries produced in the US will qualify for the 30D tax credit in 2025. Given the extended qualification periods for anode suppliers, typically three to five years, it would be a challenge to replace current anode suppliers before 2027.  Furthermore, it appears to be extremely challenging for battery producers to find reliable suppliers of qualifiable anode material at a commercial scale.

In response, major battery producers and OEMs have proposed classifying graphite as a low-value material, which would exempt it from the application of FEOC rules until January 1, 2027. Some OEMs have directly suggested graphite be temporarily excluded from the FEOC rules. This action has faced resistance from North American graphite producers.

A similar situation occurred with the 25% import duties on graphite anodes under China Section 301. Since the introduction of the tariff actions by the Trump administration, anode materials and graphite have been excluded from the tariffs for several years amid strong resistance from major battery producers and OEMs. In the latest public discussions, leading players in the EV supply chain in the US requested extensions of the exclusions for anodes beyond May 31, 2024. The resistance to the tariffs is indicative how reluctant the OEMs are to pay premiums above the current prices of anode supply from Chinese producers.

By 2025 planned graphite anode capacity, based on announcements, is expected to be over 100,000 tonnes in the US. But these plants would be part of relatively new operations that we need to go through a ramp-up period and pass commercial qualification tests with battery producers. Hence, local anode supply will be insufficient to meet the demand of US gigafactories next year.

Development of anode capacity in the US and in other countries outside China has lagged behind gigafactory expansions. The main issue for the Western anode ecosystem has been underinvestment in both mining and processing capabilities due to ample supply from China and the relatively low price of anode materials compared to cathode materials. Neglect of anode production has created a vicious circle in which Western battery producers remain dependent on Chinese anode supply, while potential anode producers outside China struggle to obtain finance and to secure offtake agreements at prices that would enable returns to their investors.

It took China over a decade to build the anode capacity and know-how it has today, while anode producers in the West face significant pressure to develop capabilities within a limited timeframe and under an aggressive pricing environment.

If the EV supply chain in the US is to avoid a lithium pricing scenario in North America over the next few years, significantly higher investment in the anode supply chain will be essential.

Understand the dynamics of the graphite market

Keep up with the latest news, market intelligence and trends in the graphite market when you visit our dedicated graphite market page.

Get an in-depth, 10-year view into where and when graphite supply will come online with our graphite long-term forecast.

The post Why underinvestment in ex-China anode supply chains could make graphite exception to new FEOC rules appeared first on Fastmarkets.

While the pace of Chinese EV sales slowed on a monthly basis in the first quarter of 2023, compared with the final three months of 2022, the number of EV units sold was still higher year-on-year.

But the price of spherical graphite began a downward trajectory in mid-June 2022, falling each month until January 2023. So the slowdown in EV demand in the first quarter of this year and the build-up in anode inventories were not the only factors behind the current low prices.

In the most recent calculation on June 8, Fastmarkets assessed the price of graphite, spherical, 99.95% C, 15 microns, fob China, at $2,000-2,200 per tonne, down by more than 42% year on year compared with $3,500-3,800 per tonne on June 9, 2022.

Competition with synthetic graphite

Impressive growth in demand for lithium-ion batteries from the EV sector, combined with tightness in graphitization capacity during the first half of 2022, led to soaring graphitization costs in China.

Graphitization costs for high-end products were up by 76% during their peak in April-June 2022 compared with the first quarter of 2021, while the low-end graphitization costs doubled in the same comparison.

High graphitization costs and limited capacity prompted significant moves by the industry to rapidly add graphitization capacity in China. Phenomenal demand growth from the EV battery sector also prompted the switch of graphitization capacity away from the electrode sector to the battery anode sector, attracted by higher margins.

Consequently, graphitization capacity in China more than doubled to more than 2.3 million tonnes in December 2022 from 1 million tonnes in March 2022, according to data from Chinese news provider BAIINFO.

The rapid increase in graphitization capacity during the second half of 2022 meant that graphitization costs tumbled, with the pace of decline accelerating in line with the growth in graphitization capacity. This trend was especially visible in the final quarter of 2022, when another 1 million tonnes of graphitization capacity was added to the market.

In May 2023, graphitization prices in China were down by 60% compared with their peaks a year earlier and fell below the January 2021 lows. The sharp reduction in graphitization costs prompted a significant rise in the output of synthetic graphite in 2022, up by 62% in the seond half of the year versus the first half.

As shown in the chart (below), prices for uncoated spherical natural graphite (uSPG) followed a similar pattern to those for graphitization costs. Producing uSPG is not associated with graphitization costs, which instead comprise the key cost component of the competing synthetic graphite precursor anode material. But the effect of lower graphitization costs was directly reflected in declining synthetic graphite prices and, in turn, rising competition in the uSPG market, with uSPG prices falling to an 11-year low in May 2023.

Declining coke prices reduce synthetic graphite production costs

Since last year, needle coke prices have gone down by more than 40%. During peak needle coke pricing, battery anode producers turned to cheaper feedstock, including non-needle coke and material with higher sulfur content. This has been confirmed by traders and Fastmarkets understands that some anode producers last year were taking orders for low-sulfur sponge coke, a feedstock usually used in the aluminium industry.

Another reason for anode producers to switch to other coke materials and grades was the fear that there might be insufficient supply of needle coke to feed the expanding production of synthetic graphite in the years ahead.

Furthermore, producers have found economically viable ways to desulfurize higher sulfur grades, thus improving their quality, while remaining cost-competitive against needle coke.

The combination of graphitization overcapacity, declining coke prices and weaker-than-expected demand from the EV sector has led prices for synthetic active anode material (AAM) to decrease significantly, with the price differential between synthetic and natural-based AAM narrowing to previously unseen levels.

In April 2023, the price differential between low-end synthetic AAM and low-end natural AAM fell to around 5%. As a result, the price competitiveness enjoyed by natural AAM has been erased. Natural graphite AAM was 50% cheaper than its low-end synthetic equivalent during the summer of 2022.

Near-term outlook for spherical graphite

With spherical graphite prices now at an 11-year low, the most common question is whether the market has reached a bottom and is a rebound in prices coming? The prospect of rising prices in the near term does not look promising, for several reasons.

First, after graphitization capacity rocketed by the end of 2022 and supply of synthetic material began to exceed demand, capacity utilization rates at graphitization facilities plunged to less than 30% of capacity in April 2023 from almost 80% in November 2022.

This indicated the enormous potential of the synthetic sector to bring idled capacity back into production once demand picks up. As a result, Fastmarkets does not expect any shortfall in synthetic graphite supply in the near term and, with so much available capacity, graphitization prices should remain low.

Second, the availability of cheaper and abundant coke feedstock provides extra room for synthetic AAM producers to cut prices in order to attract demand.

Finally, ample supply of natural graphite in China would hinder a more pronounced rise in prices, given that prices were continuously declining during the usual winter stoppage of operations in China’s major graphite hub, Heilongjiang.

Even with graphite producers in Luobei keeping production at a halt in April and May, prices continued to decline.

We could see an eventual rise in prices from restocking activity during the summer, but this would probably have a limited effect on prices, considering the other factors. Hence, natural graphite supply constraints are unlikely to be a significant factor for prices in the coming months.

Prospects for markets in Europe and North America

The anode supply chains in Europe and North America are in their infancy. Local supply in both markets is far from matching expected demand in 2023 and this supply gap will only become wider by the end of the decade.

The maturity of the Chinese graphite and anode industries provides China with significant advantages regarding knowledge and economic terms, with the scale of production allowing Chinese producers to remain competitive even in periods of subdued demand and prices.

The Chinese industry also benefits from support from traditional state subsidies on both demand and production. Lower local environmental, social and governance (ESG) requirements have also supported the initial growth of the anode industry, compared with the more stringent requirements in both Europe and North America.

For the development of localized graphite and anode supply chains, the support of the markets and governments will be crucial in Europe and North America. Support from local and regional governments is important to secure the development of local mining or refining capacity.

Local markets also need to recognize that, for local supply chains to be developed and to meet the higher ESG requirements of European and North American original equipment manufacturers (OEMs) and consumers, a premium over the price of Chinese anode material will be necessary.

Only through support from local markets and governments – as well as a commitment from consumers to pay premiums for diversified, local, ESG-friendly supply – will a sustainable local anode chain be established. This could provide the needed liquidity for the development of transparent pricing mechanisms, reflecting the dynamics of the European and North American markets.

Understand the dynamics of the graphite market

Keep up with the latest news, market intelligence and trends in the graphite market when you visit our dedicated graphite market page.

Get an in-depth, 10-year view into where and when graphite supply will come online with our graphite long-term forecast.

The post Spherical natural graphite prices plunge to 11-year lows on more competition from synthetic graphite appeared first on Fastmarkets.