Economy

Here is what analysts and companies are saying about the measure:IVAN LAM, SENIOR ANALYST, COUNTERPOINT RESEARCH:”In addition to China, other countries and regions also implement graphite export controls. Graphite has a wide range of applications in industry, and the demand for its use is growing. We believe that the average price of graphite will continue to rise in the future due to supply and demand imbalances, including Russia, which was one of the major graphite suppliers before the Russia-Ukraine war.”High-sensitivity graphite is a high-performance material with a wide range of applications in industries such as semiconductors, automobiles, aerospace, battery manufacturing, and chemicals.”However, this control is not a complete ban, and there has been no significant impact on any industry during the previous temporary control.”CHRISTOPHER RICHTER, DEPUTY HEAD OF RESEARCH, CLSA IN TOKYO:”It would be a bold step to cut off the world from graphite because I think the Chinese know that would bring EVs to a halt everywhere and probably would create escalation rather than de-escalation of some of the trade disputes going on with China – between the EU and China, between the US and China.”I think what it (Japanese industry) probably will do, since the graphite is still there, is any research that you’ve got going on that can look for alternatives… probably becomes a lot higher priority and generally the solution is as to A) look for alternative sources and B) look for alternative materials.”KANG DONG-JIN, ANALYST AT HYUNDAI SECURITIES IN SEOUL:”It’s not that China would suddenly stop export graphite, but it would be more intensely regulated and reviewed. It is still unclear how far China would take this graphite export curb, which would determine the supply chains. “With this new graphite export curb, South Korean firms – or South Korea in general, which heavily rely on China for graphite imports, would need to seek alternatives, such as mines from the United States or Australia, but it would likely increase cost burden for many.” ANDY LEYLAND, CEO OF SUPPLY CHAIN INSIGHTS: “Graphite markets have been in oversupply, with falling prices, so the export licences don’t make sense from a market standpoint. They will worry the West, however, and be a boon to up-and-coming producers outside China.“This is straight from China’s commodities playbook, and a direct response to moves in the West to legislate a move away from the country.”KIEN HUYNH, CHIEF COMMERCIAL OFFICER AT ALKEMY CAPITAL INVESTMENTS, WHICH DEVELOPS PROJECTS IN THE ‘ENERGY TRANSITION METALS SECTOR’:“This bold and unexpected move by China in graphite has taken us by surprise, arriving far sooner than anyone could have predicted. The juggernaut of the Chinese battery sector is moving forward at a blistering pace, outstripping the progress in Western markets. As they increase their consumption of the essential materials that Western battery manufacturers rely on, they tighten their grip on the industry.“This turbocharges the urgency for the West to forge their independent supply chains, charting a course toward self-sufficiency in both the raw materials and the downstream components necessary to meet their own ambitious battery industry growth strategies. The race is on, and the stakes have never been higher.” NEIL WILSON, CHIEF MARKET ANALYST AT BROKER FINALTO:”Tit for tat – China says it might restrict graphite exports for use in EV batteries. It comes just days after the White House blocked sales of certain chips to China. It’s Trade Wars 2.0 and it’s inflationary.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.China has imposed export controls on graphite, a material used in electric vehicle batteries, as Beijing hits back at US-led restrictions on technology sales to Chinese companies.China, which dominates global supply chains for the mineral, will require special export permits for three grades of graphite, the commerce ministry and the General Administration of Customs said on Friday.The new export controls, which China said were introduced on “national security” grounds, are set to escalate geopolitical tensions between Beijing and Washington and its allies over tech supply chains. They also underline China’s dominance of global supplies of dozens of critical resources.Graphite for batteries can be produced either from mined material, which is called “natural” material, or in a “synthetic” process using petroleum feedstocks, which helps the cell charge quicker and last longer but is more expensive to produce. China is by far the biggest processor of natural graphite and generated almost 70 per cent of the world’s synthetic graphite last year, according to Benchmark Mineral Intelligence, making it one of the critical materials where Beijing has the tightest stranglehold.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The move comes days after US president Joe Biden’s administration tightened controls on exports of cutting-edge artificial intelligence chips to China.Beijing criticised Washington for the controls. The Chinese commerce ministry on Wednesday said the “US constantly overstretches the concept of national security, abuses export control measures and turns to unilateral bullying acts, which China is strongly dissatisfied with and firmly objects to”.Japan said it would look into whether China’s latest measures were in accordance with World Trade Organization and other international rules. “We will take appropriate steps . . . if the measures are deemed unjust,” said chief cabinet secretary Hirokazu Matsuno on Friday, adding that the government will assess the impact of the export curbs. “We will check with the Chinese side on their intentions and operational policies of the measures.” Executives at companies in the graphite supply chain said they are scrambling to understand how the new export controls differ to existing ones on graphite introduced in 2006. Graphite prices have fallen 30 per cent since the start of the year but Thomas Kavanagh, head of battery materials at commodity data provider Argus, said the restrictions could set them on an “upward trajectory internationally”.While Chinese officials are wary of retaliation that could damage China’s own companies, Beijing in recent months has started to leverage its dominance over a vast array of materials and resources in response.In July Beijing announced similar restrictions on gallium and germanium, metals used in a number of strategic industries including electric vehicles, microchips and some military weapons systems. The government also cited national security concerns.However, those export restrictions are yet to significantly disrupt supply for non-Chinese manufacturers since they typically hold stockpiles. Bill Jackson, senior director at Indium Corporation, a New York-based supplier of materials to electronics companies, expected a “slow loosening [of restrictions by Beijing] and allowing of material back out”.The new controls also require companies to obtain additional permits, which does not equate to a ban but creates uncertainty for industries dependent on the Chinese products and requires handing over confidential commercial information. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Graphite is the most common material used in the anode side of lithium-ion batteries because of its relatively low cost, high energy density and stable structure. The anode side of a battery releases electrons during discharge.Ross Gregory, a Seoul-based partner at consultancy New Electric Partners, said any ban on anode materials would be “incredibly significant”.“The whole of the car battery industry is dependent on anodes, and they nearly all come out of China,” he said. “It’s not that the rest of the world can’t catch up, they can, but it won’t happen overnight.”Hong Kong-listed shares of China Graphite Group gained 10.7 per cent on Friday following the announcement.Additional reporting by Will Lawrence-Brown in Hong Kong and Kana Inagaki in Tokyo More

NEW YORK (Reuters) – Federal Reserve Bank of Atlanta President Raphael Bostic said on CNBC Friday that while inflation remains too high it is coming down amid mounting evidence of an economic slowing, and that could open the door to easier monetary policy late next year. “We have to get a lot closer to 2% before we’re going to consider it, before I would consider any kind of relaxation of our posture. Inflation is job one, we have to get that under control,” Bostic said. But that’s possible next year, and “I would say late 2024” is on the table for an easing, Bostic said. The policymaker, who does not hold a vote on the rate setting Federal Open Market Committee this year but will next year, has said in recent remarks he believes the Fed is done raising rates. The central bank is broadly expected to hold the federal funds target rate range steady at between 5.25% and 5.5% at the Oct. 31-Nov. 1 meeting. Bostic said in the television appearance that information he’s picking up points to an economy which, while still possessing forward momentum, is losing speed. “When I talk to businesses, they all tell me the slowdown is coming,” Bostic said. “They expect that where we are today is a lot stronger than we will be six months from now,” he said, adding, “I’ve really taken that on board” when thinking about the current stance of monetary policy and how it will play out over coming months. Bostic also said in his appearance that he’s not expecting a recession. More

(Reuters) -Credit card giant American Express (NYSE:AXP) on Friday reported third-quarter profit that beat expectations, helped by resilient spending from its wealthy customers who shrugged off concerns about an economic downturn.AmEx, which caters to a premium customer base, has largely been able to mitigate the hit from inflation and the Federal Reserve’s rate hikes, which have made borrowing costly and reined in discretionary spending.In a sign of caution, however, AmEx boosted its provisions for credit losses to $1.23 billion, up 58% from last year, to account for the increased likelihood of consumers defaulting on their debt.Net write-off and delinquency rates, however, were below pre-pandemic levels, the company said. “It’s a bit of a business-as-usual quarter for us,” CFO Christophe Le Caillec said. “We see a lot of demand for our products and services coming from Gen Zs and Millennials. They are also signing up for premium products.”The resumption of student loan repayments in October has not changed spending patterns so far, the CFO said.AmEx reported a profit of $3.30 per share, up from $2.47 per share a year earlier. On average, analysts had expected a profit of $2.94 per share, according to LSEG IBES data. It also said its earnings per share and revenue for the full year would be in line with the prior forecast. The company has previously said it expects to earn $11 to $11.40 per share in 2023. “Travel and Entertainment (T&E) spending remained robust… Restaurant spending was again one of our fastest-growing T&E categories,” CEO Stephen Squeri said in a statement.Revenue, net of interest expense, surged 13%, to $15.38 billion. Consolidated expenses climbed 7%, to $11 billion, driven by higher customer-engagement costs. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Washington’s tightened export controls on chips may leave Chinese tech groups relying on outdated and stockpiled chips to pursue their artificial intelligence ambitions, with industry giants Alibaba and Baidu facing new hurdles for the manufacturing of their latest self-designed AI processors.Alibaba and Baidu’s processors have become frontrunners in China’s efforts to create domestic alternatives to US maker Nvidia’s sophisticated products, with the chips at present manufactured at TSMC and Samsung plants, said four people close to the groups’ design projects.The processing speeds of their most advanced AI chips fall within new thresholds unveiled by Washington this week as part of an update to its chip export controls, the people said, putting their partners in contravention of the rules if they manufacture them for Chinese clients.The tightening will also force Silicon Valley-based Nvidia to halt shipments to China of two processors that the company had tailor-made to comply with earlier export controls, according to a statement from Nvidia this week.Collectively, the restrictions mean Chinese tech groups will have to turn to AI chipsets similar to Nvidia’s V100, which was released in 2017 and has since been discontinued, in order to train and run generative AI models, analysts said. Since the V100 was released, chips have become significantly more advanced, enabling the creation of OpenAI’s ChatGPT.The US move poses “an existential challenge” to China’s efforts to catch up with AI development at OpenAI and other American companies, said one chip consultant in Beijing.Washington’s controls, which extend to foundries in Taiwan and South Korea contracted to make chips for Chinese groups, are made possible by the vast amount of American hardware and software embedded in the semiconductor supply chain. China’s domestic alternatives, including partially state-owned SMIC, are several generations behind in chip manufacturing technology.The updated rules come at a time of deteriorating US-China relations and an expanding programme to impede Beijing’s technological progress. “The goal is to choke off China’s access to the future of AI,” said Gregory Allen, an AI expert at the CSIS think-tank.Allen said the updated controls increased the number of advanced AI chips requiring a licence that was likely to be denied, in effect banning them for export. The controls also create a reporting regime that covers a huge swath of data centre chips with speeds just below the cutting edge and add prohibitions on selling to subsidiaries of Chinese companies outside the country.“The Department of Commerce’s visibility into high-performance computing chip exports worldwide is going to go way up,” Allen said.While China’s largest tech groups have stockpiles of AI chips, the controls will eventually make training AI models in the country more expensive and time-consuming than for their US counterparts, analysts said. Bernstein senior analyst Boris Van estimated that relying on chips similar to Nvidia’s V100 would at least double data processing costs.“Once the existing stash of chips is exhausted, Chinese AI firms would struggle to improve their models,” said Phelix Lee, an analyst at Morningstar.Big Chinese tech groups, including Alibaba, Baidu, ByteDance and Tencent, have purchased more than $5bn worth of Nvidia chips in recent months, the Financial Times reported in August, but most of these orders have not been delivered, according to several people familiar with the situation.“The supply is terrible,” said a Beijing-based AI entrepreneur desperate for Nvidia’s processors, noting that the company was months behind in deliveries. Washington has given Nvidia and other chip companies a grace period of about one month to fulfil orders to China.“Whatever portion cannot be fulfilled in the grace period will have to be cancelled,” said Charlie Chai, a Shanghai-based analyst at 86Research.While industry insiders expect some banned chips to continue to flow into the country through black market channels, they do not expect supply to fulfil the high demand from tech groups training generative AI models.“China will be permanently stuck with low-end Nvidia chips and see the [AI] infrastructure gap gradually widen with the rest of the world,” said Chai of 86Research.Samsung declined to comment. TSMC, Alibaba and Baidu did not respond to requests for comment.Video: The race for semiconductor supremacy | FT Film More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The once-sleepy fishing town of Chancay, 80km north of Lima, used to be best known as a weekend getaway for residents of the capital. But, today, the beachfront is a sprawling construction site, with cranes shifting pillars as dumper trucks rumble around below.The town is about to become host to one of the largest deepwater ports in Latin America. Construction and operation will be carried out entirely by private companies — something officials say could be a model for other infrastructure works in Peru.The project is so huge it has the potential to upend maritime traffic all along the Pacific coast of South America, displacing it from Chile, Ecuador and Colombia. In its initial phase, the port is expected to handle 1mn containers and 6mn tonnes of loose cargo a year.Cosco Shipping, a Chinese state-backed shipping and logistics company, has a 60 per cent stake in the port, with the remainder in the hands of Volcan, a Peruvian mining company. Of the $3.6bn cost of construction, $1.3bn has already been invested in the initial phase, according to Cosco.“The intention of the port is to pull South American countries towards Peru as a focal point [for trade to Asia], taking advantage of our strategic location,” says Gonzálo Ríos Polastri, deputy general manager of Cosco Shipping Ports Chancay Peru and a former admiral. “It will be an engine for development across several industries.”The port will sit on a 280-hectare site. The wave breakers alone used enough concrete to construct 20 buildings of 10 storeys and will protect 1.5km of dock space, capable of berthing some of the world’s largest cargo ships.A 1.8km tunnel bored beneath Chancay — at some points 900m deep — will connect the pier to a logistics centre and the pan-American highway without disrupting traffic in the town.Cargo will be able to reach China from Peru in 10 days, rather than 45 at present. And Brazil is also expected to be a beneficiary of the port, which will provide quicker access to Asian markets for the country’s exports. Brazil and Peru are connected by the Southern Interoceanic Highway, which passes through the Brazilian agricultural hubs of Acre and Rondônia.“There’s a whole part of Brazil that looks much more to the Pacific than to the Atlantic,” says Ríos Polastri. “Chancay has many advantages within Peru, and one is that it is the closest port to Brazil. That’s another incentive for trade.”The inauguration of the megaport is planned for late next year, when Chinese president Xi Jinping will attend the Asia-Pacific Economic Cooperation (Apec) summit, which Peru is hosting. Cosco says the port will eventually expand. “The master plan is to have 15 piers, though there’s no timeline as we need to see how the port operates in the first few years,” Ríos Polastri explains.But, despite the commercial advantages that officials say the port will bring for Peru, some observers — including US officials — have expressed concern that it could increase Chinese influence on the country’s infrastructure.Mario de las Casas, Cosco Shipping Ports Chancay Peru’s public affairs manager, says Peruvian law forbids the use of the port for military purposes without prior approval from the executive branch or Congress. “Without this preapproval, any such entry would be tantamount to an invasion independently of the ownership of the terminal,” he notes.Some local people have criticised the disruption caused by construction, too, though voters in January overwhelmingly elected a mayor who is openly in favour of the development. “I think that’s a good barometer of where the local population is in terms of acceptance of the port,” Ríos Polastri suggests.The Peruvian government says the port will boost the local economy, and local developers are hopeful. Along the road into Chancay, billboards advertise yet-to-be-built property developments for sale. “In the area, there are six fishmeal factories and a fleet of around 70 industrial fishing vessels that are the largest source of work in Chancay,” says Raúl Pérez-Reyes, Peru’s transport minister. “The project allows the possibility of direct shipment abroad.”Construction work at the Chancay port, 80km north of Lima More