What Do China's Proposed Restrictions on Battery Tech Mean?

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Any disruption to the battery supply chains may have dire consequences for the global pursuit of sustainability | Credit: ABT
Global supply chains brace as China's Ministry of Commerce proposes a series of restrictions on the export of critical battery technologies and materials

There are several technologies that will be dispensable in the world's pursuit of sustainability. Semiconductors, the key components in electronic technologies, are one such item.

Then of course there is the technology that allows us to produce clean renewable energy, such as wind turbines, solar cells and hydropower dams.

But perhaps the most important thing for the coming transition is battery technology. Batteries are vital for renewable energy storage, electric vehicles and far more besides.

Currently, China is the world's largest exporter of battery technologies as well as the component parts and materials that are used to manufacture batteries, meaning global supply chains are reliant on the discretion of the Chinese government and Chinese companies.

So, the news that the Chinese Ministry of Commerce has proposed an unprecedented export ban on technologies critical to producing Lithium Iron Phosphate (LFP) and Lithium Manganese Iron Phosphate (LMFP) battery cathodes has caused some disquiet.

In short, the proposed restrictions could have far-reaching consequences for EV manufacturing and energy storage systems worldwide.

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Why is this happening?

In recent years, LFP and LMFP battery technologies have become increasingly important in the global battery market. Together, they currently power nearly 50% of the world's electric vehicles.

By restricting global access to technologies like these, China appears to be safeguarding its position as market leader.

According to John Passalacqua, CEO of Canadian battery metals company First Phosphate Corp, this new strategy is the result of simmering tensions between China, the US and Europe over a different kind of technology.

"The first shot was fired by defence contractors and computer chip makers," he says. "What's extremely interesting now is that China's response is not only in the chip sector but also in the lithium processing technology space."

John Passalacqua, CEO of First Phosphate Corp | Credit: First Phosphate

How will the world respond?

According to industry experts, it is not all doom and gloom: the ban presents both challenges and potential opportunities for Western battery manufacturers.

Behnam Hormozi, CEO of Integrals Power, is an advocate for increased production of non-Chinese LFP and LMFP cathode manufacturing technologies.

“The Western LiB ecosystem will now only succeed if they have access to a non-Chinese LFP/LMFP CAM manufacturing technology,” he says.

Behnam Hormozi, Founder and CEO of Integrals Power | Credit: Integrals Power

Other experts believe that the impacts of China's decision won't be as bad as they seem.

"China will not drive this dogmatically but - in its typical fashion - in a trial and error approach," says Peter Willemsen, President of APAC at Webasto.

"Some technologies for some companies may be impacted case by case, but there will be no blanket approach."

Peter also believes that the ban could actually create opportunities for other world economies to shirk their reliance on Chinese exports.

"This could be an easy way for global industry to find foothold back into electrification," he says.

Peter Willemsen, President for APAC at Webasto | Credit: Peter Willemsen

An increasing urgency in the battery sector

Industry professionals are already exploring alternative approaches.

"First graphite, then LFP, there are more joining the ban list," says Qianran He, Investor at TDK.

"It's a long game but we need to take the actions now, to invest in alternative innovations like sodium ion batteries or novel Li processing methods."

Meanwhile, companies like Integrals Power are positioning themselves to address these challenges.

"Now is the time to react," says Benham, "or else we have to forget about affordable domestic supply chains for the BEV and mass EV transition."

So far, Integrals Power has developed a pilot plant capable of producing 20 tons of LFP cathode material annually, using raw materials sourced from Europe and North America.

This approach could help create more robust, sustainable and transparent battery supply chains.

Batteries are crucial for the production of climate technologies like EVs and energy storage systems | Credit: Schneider Electric

The outlook for 2025

The proposed export ban comes at a critical moment in the global energy transition.

With many industries attempting to accelerate their movement away from fossil fuels, such technological restrictions could potentially slow progress towards sustainability goals.

Dr Tara Lindstedt, Chief Development Officer at InoBat, is an expert in this industry.

“There is not enough margin in Western terms in the chemical sector," she argues.

"We need to change our mindset and curb the excessive greed for margins and ROI.”

An investment in manufacturing might be the solution, she suggests.

Tara Lindstedt, InoBat's Chief Development Officer and Chair of its Audit & Risk Committee | Credit: EPGE

As the global community continues to navigate these complex geopolitical and technological challenges, the battery industry stands at a critical juncture.

The ability to develop alternative technologies and create resilient supply chains will be crucial in maintaining momentum towards a sustainable, electrified future.

Regardless of the weight behind China's proposals, John believes this moment should serve as a “wake-up call” for the rest of the world.


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