Policy Brief: 24-5 East Africa's Potential Role in US Graphite Supply Chains
Summary:
The Policy Brief evaluates East Africa's potential in supplying natural graphite to the US market, focusing on Madagascar, Mozambique, and Tanzania. The analysis considers both domestic factors in these countries and US policies, notably the Inflation Reduction Act (IRA).
Key Points:
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Green Tech Trade War Impact: The green tech trade war, initiated by US semiconductor export controls, led China to introduce graphite export controls in December 2023. This resulted in a 93% decline in Chinese graphite exports by volume within a month, and a complete halt to exports to the US and Japan.
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Graphite Supply Challenges: Although China dominates the global graphite market, it is not the sole producer. East African countries like Madagascar, Mozambique, and Tanzania have substantial graphite resources, with a combined reserve size nearly equal to China's. However, governance challenges in Madagascar and Mozambique and domestic issues in Tanzania affect their ability to integrate into US EV supply chains.
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US Critical Mineral Policy: The US aims to reduce dependence on China for raw materials and promote trade with stable, friendly nations. Graphite sourcing from East Africa aligns with this policy in terms of Western ownership of major mines, but faces challenges due to the historical bias towards Chinese markets.
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Policy Environment: The US seeks sustainable, environmentally and socially responsible supply chains. East African producers face the challenge of upgrading from low-value to high-value graphite production to qualify for IRA-related tax credits.
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Implications for US and Global Supply Chains: The US relies heavily on China for graphite, creating vulnerabilities in its net-zero ambitions. To mitigate this, modifications to US critical mineral sourcing policies are necessary to facilitate greater involvement of African producers in US graphite supply chains.
Conclusion:
East Africa holds significant potential in graphite supply to the US market, especially with improvements in governance and strategic policy alignment. However, overcoming existing challenges requires tailored approaches to enhance the competitiveness and sustainability of African graphite production for the US automotive and clean energy sectors.
