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The market is adjusting to the temporary reprieve in the US-China trade war. Reciprocal and retaliatory tariffs from both countries are paused to enable further negotiations. However, the vast uncertainty surrounding tariffs in the US is expected to have a significantly negative impact on demand across the EV and battery raw materials sector, including graphite.
The issue of synthetic graphite import tariffs China adds to these complications. With US federal courts indicating that the Trump Administration’s use of the International Emergency Economic Powers Act (IEEPA) to implement tariffs is not legal, we are seeing the White House pressing for increased Section 232 tariffs on both steel and aluminium. Furthermore, we suspect further utilization of the Section 232 and 301 tariffs is likely if IEEPA tariffs are rescinded.
US government negotiations around the ‘One Big Beautiful Bill’ passed by the House of Representatives and now being assessed by the Senate are prompting additional uncertainty for EV and battery manufacturers. The IRS 30D EV consumer tax credits are expected to expire at the end of 2025, and there is the possibility of FEOC requirements being added to the 45X manufacturing credit.
The addition of FEOC requirements will be particularly difficult for companies in Chinese partnerships, such as Ford and CATL. It will also affect fledgling US graphite anode producers dependent on Chinese technology. The imminent expiration of the 30D EV consumer tax credits at the end of the year could provide a boost to US EV sales for the remainder of 2025. However, it will certainly detract from sales next year, and will significantly hit EV leasing deals which have been a key component of US EV sales.
The dynamic between natural and synthetic graphite continues to evolve, heightened by differential tariff treatment. While natural graphite is exempt from the universal and reciprocal tariffs as a critical mineral, synthetic graphite import tariffs China remain. Until August 12, when the 90-day pause ends, US import tariffs on Chinese synthetic graphite will stand at 55%. This comprises the 25% Section 301 tariff, the 20% IEEPA tariffs, and the 10% universal tariff. US consumers of synthetic graphite from China will imminently face significantly higher costs. We do not expect Chinese producers to absorb the full extent of the tariffs.
Fastmarkets’ outlook for the graphite market is increasingly bearish in response to the global trade war. The expectation of significantly slower US demand amid vast uncertainty contributes to this view. Graphite prices remain at or near multi-year lows, doing little to encourage needed investment in the diversification of the supply chain away from reliance on China.
News that Syrah and Tesla may exit their anode offtake agreement if Syrah’s material fails to qualify by February 2026 further highlights the challenges of developing an ex-China supply chain. Additionally, US tariff and policy uncertainty discourages business investment and complicates access to needed project financing.
Persistently high inventories throughout the supply chain, combined with sluggish demand from both the battery and steel sectors, are contributing to weak graphite prices. Excessive synthetic graphite supply adds to these issues.
The overall graphite supply surplus is masking some rebalancing in the natural graphite market. The prolonged period of low natural graphite pricing has prompted significant production cuts by producers both in China and Africa. Natural graphite producers have been forced to slash production with prices persisting at levels near, or below, operating costs. Chinese natural graphite production is returning, however, with the ending of winter seasonal production stoppages. We are also seeing increasing flows of graphite out of Tanzania as Walkabout Resources boosts production.
We maintain the view that Chinese graphite prices are at, or near, a pricing floor. However, we do not expect any significant improvement in prices before the end of the year, at the earliest. European and US graphite prices will maintain a premium versus Chinese material. This largely reflects geopolitical and trade issues, especially surrounding synthetic graphite import tariffs China.
Prices in China will remain discounted to both the US and Europe in the longer term. This enables continued dominance of both Chinese anodes and EVs in the global market.
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