China’s Ministry of Commerce recently proposed new export restrictions on key technologies used to manufacture battery components and process critical minerals like lithium and gallium. These measures, if implemented, could have significant consequences for global supply chains, especially in the electric vehicle (EV) industry, where China holds a dominant position.

Why China’s Move Is Significant

China controls nearly 70% of global lithium chemical production, a critical component in EV battery manufacturing. By tightening export controls, China aims to secure its domestic supply chains and maintain its global leadership in battery production.

Adam Webb, head of battery raw materials at Benchmark Mineral Intelligence, notes that these measures are designed to protect China’s strategic dominance in the industry. This development could pose challenges for Western manufacturers who rely heavily on Chinese processing technologies.

Global Impact on Supply Chains

1. Risks for Western Lithium Producers

Many Western companies depend on Chinese technology for processing lithium. These new restrictions could increase production costs and create supply bottlenecks for battery manufacturers in the U.S. and Europe.

2. Challenges for Chinese Battery Giants

Major Chinese battery producers like CATL, Gotion High-Tech, and EVE Energy could face limitations in expanding into international markets due to stricter technology controls.

3. Gallium Extraction Limitations

China’s export controls also extend to gallium, a material vital for semiconductors and high-performance electronics. This move could further strain global supply chains for advanced technologies.

Trade Tensions with the U.S.

This announcement comes just ahead of Donald Trump’s second presidential term, during which he is expected to implement new tariffs and trade restrictions against China. These combined actions could intensify trade tensions, creating more instability in global markets.

How Western Countries Might Respond

In response to these potential disruptions, Western nations are likely to:

Increase Domestic Investments: Scale up local battery manufacturing and critical mineral processing facilities.
Diversify Supply Chains: Strengthen trade ties with resource-rich countries like Australia, Canada, and Chile.
Accelerate Innovation: Develop alternative technologies to reduce reliance on Chinese processing methods.

What’s Next?

China’s proposed restrictions are open for public comment until February 1, 2025. If implemented, these measures could significantly reshape the global battery and EV supply chains, forcing companies to diversify and innovate to mitigate risks.

China’s proposed export restrictions on battery and critical mineral technologies signal a major shift in global supply dynamics. These policies could challenge Western manufacturers, drive up costs, and disrupt the global electric vehicle industry. Moving forward, global players must focus on diversifying supply chains and developing independent processing capabilities to navigate this evolving landscape.