Could a Trump 2024 Victory Reshape the Future of Graphite?

As the 2024 U.S. presidential race heats up, the potential return of Donald Trump to the White House becomes a real possibility. For the graphite market, this could mark a turning point. Trump’s “America First” policies, with a strong emphasis on domestic production and reducing reliance on China, could have wide-ranging effects on critical minerals, especially graphite. With global demand for graphite continuing to grow, what would a Trump presidency mean for the graphite industry?

Impact on Global Graphite Markets: U.S. – China Relations

Trump’s potential re-election could significantly reignite U.S. – China tensions. With over 74% of the total supply chain for graphite anodes under Chinese control according to Benchmark Mineral Intelligence, renewed trade conflicts and sanctions could disrupt supply chains extensively, impacting global markets. Trump has recently vowed to impose significant tariffs on Chinese-manufactured vehicles in Mexico, stating, “I will put a 200 percent tax on every car that comes in from those plants,” demonstrating his determination to decentralise China’s dominance in the EV market and establish a more secure, diversified supply chain.

In contrast, the current administration under Biden has focused on diplomatic engagements and multilateral trade agreements that might continue under a potential Democratic win in 2024, aiming to stabilise global markets without resorting to heavy tariffs, though the enforcement of a 25% tariff on graphite imports from 2026 may still pose challenges for supply chains.

Renewed Trade Tensions and Policy Implications

These developments suggest Trump might be willing to impose even higher tariffs on Chinese graphite, reflecting his aggressive stance on trade. This prospect of higher tariffs on Chinese graphite is an encouraging sign for ex-China graphite companies. It could help level the playing field, allowing these companies to become more competitive in the global market as buyers look for alternative sources of graphite to avoid the higher costs associated with Chinese imports.

Given the recent delays in enforcing restrictions on sourcing graphite from countries designated as Foreign Entities of Concern, allowing continued sourcing from China until 2027, there is an urgent need to reassess strategies to strengthen the graphite industry. As Julian Babarczy, Non-Executive Director at Lincoln Minerals (ASX:LML) noted, although companies have been given more time, they must act now, or risk missing out on the graphite supply they need.

Evolving Policies and the Implications for Graphite

One key area of focus for Trump’s potential second term would likely be energy policy, which would have direct implications for graphite demand. Trump has voiced skepticism about climate change policies and advocated for traditional energy sources, such as coal, oil, and natural gas. Should Trump scale back federal support for renewable energy and electric vehicle incentives such as the Inflation Reduction Act, demand for EVs – and therefore graphite – could face short-term challenges.

However, the broader market dynamics suggest a different trajectory. Despite potential policy shifts and regardless of who is in office, the fundamental market demand for graphite – driven by the global transition towards electric vehicles – is likely too strong to be significantly altered by policies and a president alone. With EV and ICE vehicle price parity projected to occur in the near future, the affordability of EVs will continue to accelerate their adoption, further cementing the long-term demand for graphite.

Furthermore, the inclusion of high-profile proponents of electric vehicles, such as Elon Musk, in Trump’s close circle could be a positive signal for the EV industry. Musk’s strong advocacy for and investment in electric vehicles could help counterbalance any potential negative impacts of policy changes, potentially ensuring continued federal support for the EV sector.

Opportunities for Graphite Companies Under Trump

Should Trump regain the presidency, his aggressive stance towards China could significantly benefit graphite companies outside of China. If Trump imposes substantial tariffs on Chinese graphite, it could make sourcing from China economically unfeasible, compelling companies to seek alternative suppliers. This will benefit ex-China graphite companies as the global market will need to source graphite from elsewhere. In particular, graphite-rich countries like Australia, Brazil, Canada, and several African nations are well-positioned to capitalise on this shift. During Biden’s term, such initiatives were supported by significant governmental funding, including an additional $40 billion loan authority for clean energy projects under the Inflation Reduction Act. Companies active in the critical mineral sector, particularly those involved with graphite exploration, development, and production, could uncover significant, previously untapped opportunities within the U.S. market.

Amid evolving U.S. policy, International Graphite (ASX:IG6) is poised to leverage governmental support from the USA. During our recent interview, Andrew Worland highlighted IG6’s strategy to capitalise on these initiatives, aiming to enhance their operational and financial framework through strategic U.S.-Australian collaborations.

What Does This All Mean?

A second Trump term could result in significant changes for the graphite market. Trump’s ‘America First’ policies would likely bolster domestic graphite production, providing U.S. companies, or those in countries with U.S. free trade agreements, new opportunities to enhance their role in the global supply chain, currently overshadowed by China’s dominance. However, it’s important to note that the overall goals of enhancing domestic supply and reducing dependence on foreign minerals might be similarly pursued under Democratic policies, albeit through different approaches.

Meanwhile, potential trade tensions with China and shifts in energy policy could introduce new challenges and uncertainties for both domestic and international graphite markets. As the world continues its transition to electric vehicles and clean energy technologies, the demand for critical minerals like graphite is expected to persist, regardless of the election outcome. Echoing this sentiment, Shaun Verner, CEO of Syrah Resources (ASX:SYR) noted in regards to the election outcome: “Potentially the mode of policy implementation may be different, but the outcome is likely to be quite similar in terms of the development of domestic supply of these critical materials.” This perspective suggests that while the strategies may vary, the overarching goal of strengthening domestic supply chains remains a constant priority.

As we consider the future of the graphite industry and its critical role in the clean energy transition, one must ask: To ensure stability in critical mineral markets, is a more balanced approach required, or can the path to reducing global reliance on Chinese minerals be sustained through aggressive policies?