Luisa Moreno, president of mining company Defense Metals Corp., expects China to continue to restrict exports of metals, which may include rare earths.
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China’s restrictions on metal exports to gallium and germanium could prompt some countries to diversify their supply chains away from China.
“This may be a wake-up call for some [countries] to gradually build production elsewhere,” Stewart Randall of Shanghai-based consulting firm Intralink told CNBC.
“Considering that 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 is export restriction of two metals — gallium and germanium — key to semiconductor production starting August 1, which is seen as a warning to Europe and the United States in the technology war over advanced chips.
China produce 60% germanium and 80% gallium in the worldbased on data from the Critical Raw Materials Alliance, an industry body.
We will probably continue to see [export restrictions] and it will probably affect other materials like rare earths, again China controls more than 85% of production…
Luisa Moreno
President, Defense Metals Corp
Both the European Commission and the United States expressed concern about China planned curb.
“The fact that China stopped exporting metals is really a warning. It reminds European countries that they need to have their own supply chains,” Brady Wang, vice president of Counterpoint Research, told CNBC.
China may impose more restrictions
Luisa Moreno, president of mining company Defense Metals Corp., expects China to continue to restrict exports of metals, which could include rare earths.
Rare earths are essential for high-tech consumer products such as smartphones and military equipment such as radar systems. Rare earths are formed group of 17 elements including scandium, yttrium, and lanthanides.
“We will probably continue to see [export restrictions] and it will likely affect other materials such as rare earths, again, China controls more than 85% of production,” Moreno said on CNBC’s “Street Signs Asia” on Tuesday.
In 2010, China Stop exporting rare earths to Japan after a territorial dispute. China also threatened to stop exporting rare earths to the US in 2019.
“[The impact from the metals curbs] not big in the short term, but if China imposes [curbs on other critical materials]that will be a more long-term problem,” said Mr. Wang of Counterpoint.
“China also has to be careful because blocking exports can hurt Chinese companies as well as they will lose foreign customers,” said Randall of Intralink.
Diversify out of China
A major raw material supplier said mills are preparing to start producing gallium. The two metals targeted in China’s upcoming restrictions are not found naturally and are instead typically created through refining other metals.
“We get a lot of calls from our customers, there’s a lot of activity out there. And we’re going into the market to make sure we can secure supply,” said Ross Berntson, owner. President and CEO of Indium Corporation, said Wednesday on CNBC’s “Squawk Box Asia.”
Indium supplies key raw materials such as gallium and germanium to global chip and electronics companies.
“There are about 10 factories that can start producing gallium right now… and if we can activate those production units, we will have more gallium in geographies other than China. ,” Berntson said.
Although China produces most of the world’s gallium and germanium, it is not the only producer.
Russia, Ukraine, Japan and Korea also gallium production, according to a 2021 study by the Indian government. Canada, Germany, Japan, Slovakia and the United States recycle gallium from new scrap.
Meanwhile, Belgium, Germany and Russia can germanium production, based on data from the United States Geological Survey. The United States can also recycle new and old scrap for germanium.
“Metals like gallium and germanium are not the only metals. China is a major supplier of these metals and this helps keep metal prices low,” said John Strand of telecoms consultancy Strand. Consult said.
Clete Willems, partner at law firm Akin Gump Strauss Hauer & Feld, said: “My view is that even if they were to crack down hard here, it’s really going to impact prices more than impact on prices. overall supply”. Asia” on Tuesday.
