China's export constraints on gallium and germanium could prompt certain countries to start shifting away from Chinese suppliers. Luisa Moreno, President of Defense Metals Corp., observed that China may impose more restrictions, such as on rare earths. "It is probable that we will still witness [export restrictions] and it could impact resources like rare earths, which China accounts for more than 85% of the production," Moreno stated on CNBC's "Street Signs Asia" on Tuesday.
China's decision to impose export restrictions on gallium and germanium may push some countries to look for alternative sources of supply. Stewart Randall of Shanghai-based consultancy Intralink told CNBC that without this move, "most of the world would be perfectly happy to continue relying on China." Last week, the Chinese commerce ministry restricted the exports of the two mentioned metals, used in the production of semiconductors, as a warning to Europe and the U.S. in the context of the tech war over advanced chips. According to the Critical Raw Materials Alliance, China produces 60% of the germanium globally and 80% of gallium.
Both the Europe Commission and U.S. voiced worry concerning China's proposed restrictions. Brady Wang, associate director of Counterpoint Research, pointed out to CNBC that "China hindering the exports of the metals is really a warning. It serves as a reminder to European nations they should have their own supply networks."
Luisa Moreno, president of mining company Defense Metals Corp, foresees that China will continue to put a limit on metal exports, which could include rare earths. Rare earths, which are required for the manufacture of high-tech consumer products like smartphones and military paraphernalia such as radar systems, consist of 17 elements, including scandium, yttrium, and the lanthanides. On Tuesday's episode of CNBC's "Street Signs Asia", Moreno claimed, "We can anticipate that [export restrictions] will remain in place, and it could involve other materials like rare earths, where China holds more than 85 percent of production."
In 2010, China ceased exports of rare earths to Japan in reaction to a territorial issue. China also warned of discontinuing rare earths exports to the U.S. in 2019. According to Wang of Counterpoint, "The effects of the metal restrictions aren't noteworthy in the short run, yet if the Chinese chose to limit exports of other key substances, that could be an extended term problem." Randall from Intralink noted that China has to be careful as blocking exports would have a negative impact on Chinese companies by causing them to forfeit their foreign purchasers.
Suppliers of important materials revealed that factories were ready to commence producing gallium. The two metals targeted in the upcoming bans imposed by China are not found naturally and can only be obtained by refining other metals. On Wednesday, Ross Berntson, President and Chief Operating Officer of Indium Corporation, spoke on CNBC's "Squawk Box Asia" that his firm had received many inquiries from their customers and were trying to secure a sufficient supply. Indium provides crucial materials like gallium and germanium for electronics and semiconductor firms around the world. Berntson stated that there were ten factories that could begin producing gallium. He also added that if these factories were activated, ample gallium could be found in places other than China.
Despite China's leading role in the global supply of gallium and germanium, other countries also contribute. In 2021, India documented production of gallium from Russia, Ukraine, Japan, and South Korea as well as recycling of gallium from Canada, Germany, Japan, Slovakia, and the U.S. Additionally, data from the U.S. Geological Survey shows that Belgium, Germany, and Russia can manufacture germanium, while the U.S. recycles both new and old scrap for the metal. On CNBC's "Squawk Box Asia," Clete Willems, partner at Akin Gump Strauss Hauer & Feld, explained that metals such as gallium and germanium can be sourced from other countries, and that a potential crackdown in China on these materials would likely only affect pricing. John Strand of Strand Consult also noted that China plays a critical role in keeping the cost of gallium and germanium at reasonable levels.
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