Luisa Moreno, president of mining company Defense Metals Corp, expects China to further restrict exports of metals that could include rare earths.
Jakub Porzycki | Nurphoto | Getty Images
Chinese metal export restrictions on gallium and germanium could prompt some countries to diversify their supply chains away from China.
“It could be a wake-up call for some (countries) to gradually ramp up production elsewhere,” Stewart Randall of Shanghai-based consultancy Intralink told CNBC.
“While if China never did anything, most of the world would be perfectly happy to continue to rely on China,” Randall said.
China’s Commerce Ministry announced last week that it was restricting exports of two metals – gallium and germanium – key to the manufacture of semiconductors from August 1, in what is seen as a warning to the and the United States in a technological war on advanced chips.
China produces 60% of the world’s germanium and 80% of the gallium, according to data from the Critical Raw Materials Alliance, an industry body.
We are likely to continue to see (export restrictions) and this will probably affect other materials such as rare earths, of which again, China controls more than 85% of the production…
Luisa Moreno
President, Defense Metals Corp
The European Commission and the United States expressed concern about china planned borders.
“China’s halt to metal exports is actually a warning. It reminds European countries that they need to have their own supply chains,” Brady Wang, associate director of Counterpoint Research, told CNBC.
China may impose more restrictions
Luisa Moreno, president of mining company Defense Metals Corp, expects China to further restrict exports of metals that could include rare earths.
Rare earths are essential for high-tech consumer products like smartphones and military equipment like radar systems. Composition of rare earths a group of 17 elements composed of scandium, yttrium and lanthanides.
“We will likely continue to see (export restrictions) and that will likely affect other materials like rare earths, which again China controls over 85% of the production,” Moreno said Tuesday on “ Street Signs Asia” from CNBC.
In 2010, China stopped its rare earth exports to Japan following a territorial dispute. China also threatened to halt rare earth exports to the United States in 2019.
“(The impact of restrictions on metals) is not significant in the short term, but if the Chinese impose (restrictions on other critical materials), it will be a problem in the longer term,” Wang said. Counterpoint.
“China also needs to be careful because blocking exports could harm Chinese companies and cause them to lose their overseas customers,” said Randall of Intralink.
Diversification outside of China
A supplier of key materials said factories are preparing to start production of gallium. The two metals targeted in China’s upcoming restrictions are not found naturally and are instead typically created through the process of refining other metals.
“We’re getting a lot of calls from our customers, there’s a lot of activity out there. And we’re engaging with the market to make sure we can secure supply,” said Ross Berntson, president and CEO of the operation of Indium Corporation. CNBC’s “Squawk Box Asia” on Wednesday.
Indium supplies key materials such as gallium and germanium to global electronics and chip companies.
“There are about 10 plants that could activate gallium production right now … and if we can activate these production units, we will have ample gallium in other geographies than China,” Berntson said.
Although China produces the majority of the world’s gallium and germanium, it is not the only producer.
Russia, Ukraine, Japan and South Korea as well produce gallium, according to a 2021 Indian government study. Canada, Germany, Japan, Slovakia and the United States recycle gallium from new waste.
Meanwhile, Belgium, Germany and Russia can make germanium, based on data from the US Geological Survey. The United States can also recycle new and old scrap for germanium.
“Metals such as gallium and germanium are not unique metals. China is a major supplier of these metals and this helps keep metal prices low,” said John Strand of telecommunications consultancy Strand Consult. .
“My view is that even if they crack down vigorously here, it will really have more of an impact on prices than an overall impact on supply,” said Clete Willems, partner at law firm Akin Gump Strauss Hauer. & Feld, on CNBC’s “Squawk Box.” Asia” on Tuesday.
