At the very beginning of July 2023, we published an article about China restricting exports of metals that are extremely important for the production of electronics and not only metals – gallium and germanium. This move was planned as a response to US sanctions that continue to expand. Since August 1, the Celestial Empire has limited exports, and the consequences immediately appeared – for example, gallium has risen in price by 50% in just two weeks. This is probably not the limit, plus China may take further steps to limit exports of other elements. Details are under the cut.
What’s with the prices?
In just two weeks, the cost of gallium has increased by one and a half times. The main reason is both a strong reduction in the export of this metal from China, and further market expectations for a worsening situation. Now export companies need to obtain special licenses in China. This is a new requirement of the authorities, which was adopted under the influence of the current “good” relations between the United States and China.
Gallium is used in many industries – not only in electronics, but also in metallurgy, the development of radars and other systems. Accordingly, if China seriously restricts exports, and it is already doing this, then there will be a shortage in the market. And until logistics, trade and other chains are rebuilt (and China is still not the only supplier of this metal, just one of the largest), the deficit will increase. It takes several weeks for an export company to obtain a license, so the wait is long, while industrial companies are gradually losing stocks of this metal.
Experts find it difficult to predict the timing of gallium supplies even if China promptly issues licenses to all exporters. It will most likely be weeks, if not months.
At the moment prices have not surged 100%-200% or more as industry in the US, Europe and other countries still have stockpiles of the metal. But what will happen if supplies are not resumed before the reserves are exhausted, it is difficult to say. Most likely, prices will rise very strongly, which, of course, will affect products. So, the current situation will affect the prices of devices and components that are made using the metals mentioned in the article. Fiber-optic systems, night vision devices, high-speed switching circuits and everything else will become more expensive. The higher the deficit of gallium and germanium, the higher the prices will be, here the dependence is relatively simple.
This opinion is supported, for example, by Dan Manaig (Dan Manaig), director of global sales and strategy of the Chinese oil refinery Wuhan Tuocai Technology Co. Gallium is currently trading at $398.60 – $428.57, depending on the supplier.
Possible way out
Of course, manufacturers of products that require gallium are not sitting still. The United States, for example, is already negotiating and concluding contracts for the supply of gallium from Canada. This metal is obtained as a secondary product of coal and bauxite processing. In addition, gallium, like other rare earth metals, can also be mined from electronic waste – gadgets and their components that ended up in a landfill. US Department of Defense officials said it is relatively easy to obtain gallium from e-waste, plus it is a relatively fast process that will produce enough gallium for various industries.
“There was no happiness, but misfortune helped,” perhaps this proverb will become the motto for the new time, when important chemical elements still begin to be mined by processing electronic waste. There is a huge amount of it in the world.
Other governments are also trying to reduce dependence on China, not only in terms of gallium, but also in other elements. True, this is not an easy task, since over the years of globalization, China has been able to become the main supplier of the metal. Before the restrictions, China exported between 80 and 90 tons of pure gallium and 50 tons of gallium oxide per year before the restrictions, according to the Shanghai Metals Market. This is about 13% of the volume that is produced in the Middle Kingdom – the country uses the rest for its own needs.
China is sawing the branch it sits on
Of course, the Chinese analyzed the situation before imposing restrictions. But, as mentioned above, supply chains can still be rebuilt. And if this happens, China itself will face new problems. Having found new suppliers of metals, not only gallium, Western countries will begin to cut supplies from the now unreliable China. Once this happens, the country will rapidly lose its market share. Prices in this case will go down, and when China resumes supplies, it may turn out that this product will no longer be bought so actively.
Market share moves from one country to another – a clear demonstration
The problem is that gallium, together with germanium and other metals, is not so rare, as mentioned above, it is not so difficult to obtain them, now the main problem is that large volumes are needed. Establishing their production in other regions is a solvable problem. But this cannot be done quickly.
And this is not just a guess. The fact is that a few years ago China did about the same with the supply of other elements – tungsten, antimony, etc. Then the global market quickly rebuilt, but China lost its market share. Moreover, exports themselves are not a panacea, as the smuggling trade in resources has developed both in the past and now. Companies from the same China are beginning to export resources from the country without a license, moreover, in large volumes, without paying taxes that the country’s budget needs.
Useful materials on the topic