“China Weaponizes Batteries After Rare Earths” — Korean Industry Weighs Uncertainty Against Potential Gains

China to Restrict Exports of Key Battery Materials
Industry Says “Not a New Risk” as Supply Chains Diversify Post-IRA
Korean Battery Makers Eye Possible Gains in U.S. Market

China, following its expansion of rare earth export controls, will implement new export restrictions on lithium-ion battery materials starting next month. The move is widely viewed as an attempt not merely to assert leverage ahead of the upcoming U.S.-China summit, but to solidify Beijing’s global dominance over strategic assets. Within South Korea’s industry, the outlook is mixed—expectations that domestic battery producers with established local operations may benefit from reduced Chinese exports are countered by growing concerns over longer-term industrial uncertainty.

China’s Export Restrictions on Batteries, Cathode Materials, and Graphite

According to the South China Morning Post (SCMP) on the 17th, China’s Ministry of Commerce and General Administration of Customs announced on the 9th new export controls on lithium batteries and related materials. Effective November 8, the regulation covers lithium-ion batteries with an energy density of at least 300 watt-hours per kilogram (Wh/kg), major battery manufacturing equipment, synthetic graphite anodes, natural graphite, and high-performance lithium iron phosphate (LFP) cathode materials. Companies seeking to export these items must obtain government approval under China’s dual-use item export control regulations.

Analysts interpret the move as a strategic effort by China to consolidate its dominance in the lithium battery industry and slow the progress of competing nations—particularly given the increasing strategic importance of high-performance batteries for military use. Civilian and defense battery requirements differ substantially: while electric vehicle manufacturers focus on driving range and production cost, military applications demand high energy density, lightweight design, performance under extreme temperatures, and safety. The new export control directly targets batteries meeting these military-grade standards.

These high-performance batteries are emerging as crucial power sources beyond electric vehicles and humanoid robots, extending into defense equipment. Last month, during the 80th anniversary military parade marking China’s victory in the Second Sino-Japanese War, Beijing unveiled a new hybrid-electric tank capable of speeds up to 85 kilometers per hour. In another example, the China State Shipbuilding Corporation (CSSC) showcased a domestically developed electric unmanned submarine at Malaysia’s defense expo in May last year, featuring an electric engine capable of reaching 12 knots, diving to depths of 300 meters, and operating over a range of 500 nautical miles (approximately 926 kilometers). China’s bold export restriction is thus underpinned by its recent advances in solid-state battery technology—often hailed as the “dream battery.”

Unlike conventional lithium-ion batteries that use liquid electrolytes, solid-state batteries employ solid electrolytes, offering enhanced resistance to heat and pressure, reduced fire and explosion risk, and higher energy density—making them the leading next-generation candidate. While lower ionic conductivity and high interfacial resistance between solid electrolytes and electrodes have long been major challenges, recent breakthroughs by Chinese research teams suggest that mass production may soon be feasible.

A research team led by Professor Zhang Chang at Tsinghua University announced the development of a new polymer electrolyte that significantly improves interfacial stability, achieving an energy density of 600 Wh/kg while passing safety tests such as nail penetration and six-hour exposure at 120°C. Separately, the Chinese Academy of Sciences’ Institute of Physics reported the development of a “dynamic adaptive interface” technology utilizing iodide ions to reduce interfacial resistance and enable self-healing. The team asserted that this innovation could enable mass production of batteries exceeding 500 Wh/kg within three to five years. Given that China currently supplies more than 70% of the world’s battery materials and over 60% of batteries themselves, such technological progress is expected to further entrench its role in the global battery supply chain.

A Severe Blow to the U.S. Energy Supply Chain

Following its rare earth export controls, China’s restrictions on battery materials are expected to have significant repercussions for U.S. companies, especially in the energy sector. The United States depends partly on energy storage systems (ESS) to meet the immense electricity demands of artificial intelligence (AI) data centers, and without Chinese batteries, supply disruptions are inevitable. According to BloombergNEF, roughly 70% of lithium-ion batteries imported into the U.S. for grid-related use between January and July this year originated from China.

ESS facilities utilizing large lithium-ion batteries play a key role in stabilizing intermittent renewable energy sources such as solar and wind power by storing and supplying electricity when needed. Over the next decade, the U.S. is projected to install 136 gigawatts (GW) of ESS capacity—enough to power about 102 million households. As the U.S. struggles to meet surging electricity demand from AI data center expansion, a rapid increase in ESS installations is essential for maintaining supply stability.

Against this backdrop, observers say Beijing is targeting a key vulnerability in America’s AI industry by restricting battery exports. The Center for a New American Security (CNAS) told Bloomberg that “while China’s AI development has been constrained by limited access to advanced semiconductor supply chains, in the U.S., energy demand management has become a critical bottleneck for infrastructure such as AI data centers.”

A Crisis and an Opportunity for Korean Companies

For South Korea’s secondary battery industry, China’s export controls represent both a threat and a potential opening. The heavy reliance on Chinese materials raises concerns over delivery delays and higher raw material costs. China commands an overwhelming share of the global battery supply chain. According to the Ministry of Trade, Industry and Energy’s data on “Import Share of Core Secondary Battery Materials,” over the past five years, Korea’s dependency on Chinese imports reached 97.7% for natural graphite and 98.8% for synthetic graphite. Imports of precursors and lithium hydroxide—key inputs for cathode materials—also depended on China by 94.1% and 82.7%, respectively. South Korea’s major battery manufacturers—LG Energy Solution, Samsung SDI, and SK On—operate plants in China, making them vulnerable to tighter export permit procedures and potential logistics disruptions.

However, many industry experts believe the short-term impact will be limited. One industry insider stated, “Since the implementation of the U.S. Inflation Reduction Act (IRA), companies have already diversified their raw material supply chains,” adding that “China is more likely to tighten export approvals rather than impose an outright ban.” He also noted, “During the previous graphite export restrictions, only documentation reviews became stricter—exports were never halted.”

Some analysts even suggest that the measure could create new opportunities for Korea’s battery sector. Beginning in 2027, under the IRA, companies using Chinese graphite will no longer qualify for tax credits, positioning Korean battery makers as alternative suppliers for U.S. automakers. With the U.S. ESS market expanding rapidly, demand for Korean-made batteries with low Chinese dependency is expected to rise. Recently, LG Energy Solution signed a $4 billion ESS battery supply deal with Tesla, while Samsung SDI and SK On are also accelerating efforts to grow their North American customer base.

Korean material producers pursuing localized supply chains may also see secondary benefits. POSCO Future M recently secured a $470 million contract to supply natural graphite anode materials to a global automaker. As Korea’s only large-scale anode material manufacturer, POSCO Future M is developing a fully integrated supply chain from natural graphite ore to spherical graphite and finished anodes. The company is sourcing graphite from non-Chinese countries such as those in Africa and constructing a spherical graphite processing plant in Saemangeum, North Jeolla Province.

Similarly, L&F recently partnered with LS to complete a precursor plant in Saemangeum for supply chain localization. The facility aims for an annual capacity of 20,000 tons in its first phase by 2026, 40,000 tons by 2027, and 120,000 tons—enough for 1.3 million EVs—by 2029. L&F explained that the plant’s purpose is to achieve material self-sufficiency for the North American market, using only non-Chinese raw materials for precursor production.

Nevertheless, many within the industry caution that complete decoupling from China remains unrealistic in the near term. Given cost and volume constraints, Korean firms cannot yet fully turn their backs on China. According to market research firm SNE Research, Chinese companies accounted for 95% of the 695,000 tons of anode materials loaded into electric vehicles worldwide between January and July this year, while Korean firms represented only 2.7%. In other words, should China immediately enforce strict controls on core battery materials, Korean companies would inevitably remain within the blast radius of potential disruption.