China Keeps Its Edge On U.S. in Minerals --- The West gained access to a leading graphite mine -- then things went awry

 

"When mining executive Shaun Verner first visited his company's graphite deposit in Mozambique in 2017, he felt sure he had a winner.

His goal: to challenge China's dominance over the world's supply of a critical mineral used in everything from electric vehicles to submarine hulls.

Backed by more than $100 million of U.S. government financing, Verner and his Australia-based company, Syrah Resources, opened the Mozambique mine and built a graphite-processing plant in Louisiana, the first of its type in the U.S. It also signed a sales deal with Tesla, which has historically bought graphite for car batteries from China.

Then things started going off the rails.

China, which provides more than 90% of the world's battery-grade graphite supply, jacked up its production, flooding the market and driving prices so low that Syrah couldn't mine profitably. Last May, the Biden administration delayed new rules that would have penalized U.S. users from buying Chinese graphite. In Mozambique, farmers resettled from Syrah's mine staged protests, shutting mining.

Syrah's Louisiana plant, now open for a year, has yet to make its first commercial sale. Syrah's stock has plunged since the start of 2023.

The company's challenges help show why, in the David-versus-Goliath battle for the world's critical minerals, China, the Goliath, keeps winning.

The U.S.'s desperate need for critical minerals -- which includes resources such as nickel, lithium and cobalt in addition to graphite -- has been underscored by the Trump administration's aggressive push for greater access in Ukraine and Greenland, rattling allies. In December, Beijing said it would ban certain mineral exports to the U.S. and conduct stricter reviews of graphite sales, in response to U.S. restrictions on semiconductor exports to China.

Yet with its thumb on many of the best resources, China can dictate prices. Washington's policy flip-flops keep blowing up miners' plans. And many Western mining companies struggle to navigate higher-risk countries where critical minerals are prevalent, leaving them flat-footed when unrest erupts.

There is considerable debate in mining circles over whether China is intentionally overproducing to put Western companies out of business.

It is also possible Chinese companies are just trying to maximize production and earnings, since they can be profitable at lower prices than Western competitors.

China's Foreign Ministry didn't respond to a request for comment.

The share of the world's refined lithium produced in China or by Chinese owners abroad hit 71% last year, up from 49% in 2017. Over the same span, the country's control of refined nickel rose to 55% from 38%, according to Benchmark Mineral Intelligence. Most of the world's graphite mining takes place in China or in Africa.

Graphite customers "have ultimately made the economically rational, but strategically dangerous decision to essentially go all in on China's supply," Verner said.

Syrah, a small Australian firm, broke into the big leagues in 2011 when it purchased a company that owned mineral rights throughout East Africa, including the Balama graphite deposit in northern Mozambique. Verner, who had spent 20 years at BHP, became Syrah's chief executive in 2017.

A Credit Suisse analyst predicted that Syrah's mine, dug out of a forested area, was a global standout that could "provide 100% of the world's current requirements for natural graphite for about 1,000 years."

Syrah wanted to do more than just mine. Company leaders also wanted to process the graphite to unlock more profit, though such work is expensive and complicated, with much of the world's expertise in China.

Undeterred, Syrah licensed processing technology from a Chinese producer and began working out the kinks of "spheroidization," a complex process that turns graphite into tight balls, which are jam-packed into the anodes of EV batteries to boost energy density and performance.

Syrah's ambitions dovetailed with the goals of the Biden administration, which wanted to use EV manufacturing to rebuild U.S. industrial strength.

In July 2022, Syrah was awarded a $102 million Energy Department loan to build up the Louisiana graphite-processing facility, creating nearly 100 high-skilled and operations jobs. That August, Congress established a $7,500 subsidy for EV purchases to boost demand. A couple of months later, the Energy Department announced a $220 million grant to Syrah to quadruple output in Louisiana.

China wasn't sitting still. State-owned mining giant China Minmetals began pumping out enormous quantities in 2022 from a huge new mine in northeast China. Chinese companies also built new factories to make synthetic graphite, an industrially produced alternative that is also used in EV batteries.

The surge in Chinese graphite production sent spherical graphite prices plummeting to $2,400 a metric ton in April 2023 from $3,650 a year earlier.

In response, Syrah halted mining in Mozambique for four months in 2023. It later restarted, but at reduced levels. Verner said the company wouldn't produce at a loss.

The company still had one significant thing going for it: A 2022 law signed by then-President Biden that penalized the use of Chinese graphite. But in May 2024, the Biden administration said it would waive the planned penalties for two years.

Last October, the U.S. government lent Syrah $150 million more, this time to support the Mozambique mine. But things weren't rosy there, either.

In December, Syrah said protests at its mine had put it in default on its loan agreements with the U.S., because of the prolonged interruptions. The company said it spent $18 million more than it earned in the last three months of 2024.

Despite the challenges, Verner says Syrah's best days are ahead. He hopes the company will restart mining, though when that will happen remains uncertain.” [1]

1. World News: China Keeps Its Edge On U.S. in Minerals --- The West gained access to a leading graphite mine -- then things went awry. Emont, Jon.  Wall Street Journal, Eastern edition; New York, N.Y.. 12 Mar 2025: A7.