Beginning August 1, China will impose export restrictions on some gallium and germanium products–metals used in computer chips and other products–to protect national security interests. Industrial experts say the move—viewed as retaliation against U.S. export restrictions aimed at curbing China’s high-technology industries—is unlikely to immediately hit global output of semiconductors and other products, in part because China would be hurting its own technology industry if it implemented the controls too strictly. But, some countries are worried. Both South Korea and Japan have large semiconductor industries that would be exposed to a shortage of the two minerals. According to Wei Jianguo, a former vice minister of commerce, China’s latest export curbs are just a start and China has sanction options should the United States impose stricter technology restrictions on it. Their actions underscore the growing dependence of the free world upon China for minerals necessary for modern life and the energy materials necessary to sustain it.
China mines and exports large quantities of gallium and germanium, providing the raw materials to countries such as the United States and Japan that process them into high-end products, which can then be used in manufacturing advanced semiconductors, military radars, LED panels, solar panels, electric vehicles and wind turbines. China has exported these minerals relatively cheaply, allowing the country to become the dominant supplier. Should disruptions occur, however, the metals and mining industry has options to help plug the shortfall. For example, in the United States and Australia, germanium and gallium can be recovered as byproducts from zinc and alumina refineries.
Unlike these two minerals, China obtains many other minerals such as cobalt from mines in other countries and processes them in China, dominating the world’s supply chain by being able to use cheap coal power and lax regulations to perform the processing.
Germanium
Germanium ores are rare and most germanium is a by-product of zinc production and from coal fly ash. China has plenty of coal fly ash as it consumes over 50 percent of the world’s coal. China produces around 60 percent of the world’s germanium, and the rest comes from Canada, Finland, Russia and the United States. China exported 43.7 metric tons of unwrought and wrought germanium last year. According to the U.S. Geological Survey (USGS), about $39 million worth of germanium was consumed in the United States last year, 10 percent higher than 2021.
Gallium
Gallium is found in trace amounts in zinc ores and in bauxite, and gallium metal is produced when processing bauxite to make aluminum. Around 80 percent of gallium is produced in China. Gallium is used to make gallium arsenide for use in electronics. Only a few companies in Europe, Japan, China, and Canada can make it at the required purity. China exported 94 metric tons of gallium in 2022, 25 percent higher than in 2021. U.S. imports of gallium metal and gallium arsenide wafers in 2022 were worth about $3 million and $200 million, respectively, according to USGS. High-purity refined gallium production last year was estimated at about 290,000 kilograms–a 16 percent increase from the 250,000 kilograms in 2021. The compound gallium nitride is used to make semiconductors that deal with high-voltage electrical flows, such as power-management chips used in cars and certain radio-frequency chips for telecommunication devices.
Defense Strategic Stocks
The Defense Department has a strategic U.S. stockpile for germanium but currently has no inventory reserves for gallium. Germanium is used in military applications such as night-vision devices, as well as satellite imagery sensors. Gallium is used in radar and radio communication devices, satellites and LEDs. Major defense contractors like Lockheed Martin Corp do not buy the precious metals directly, rather they purchase semiconductors from suppliers who source Chinese gallium and germanium. Restrictions on that supply will potentially slow down the production of DOD systems or ratchet up their cost. But, the restrictions will likely have little short-term impact for defense companies, which tend to buy materials for critical systems far in advance. The Pentagon will eventually have to find alternate sources for gallium and germanium “whether it’s direct mining, direct manufacture, direct refining or production, or from a recycling program from obsolete equipment.”
Other Possibilities
Nyrstar, which is owned by trading giant Trafigura Group (a Netherlands based company), is the world’s No. two zinc producer and is considering building a $150 million facility to recover and process germanium and gallium at its zinc smelter in Clarksville, Tennessee. The facility could produce enough of the metals to meet as much as 80 percent of annual U.S. demand. Nyrstar could also consider extracting germanium at its Australian operations, which could account for about 5 percent of world production.
According to the USGS, there are substantial U.S. reserves of germanium in Alaska, Tennessee and Washington, and the United States is able to recycle new and old scrap, according to the USGS. Some domestic zinc deposits could also hold a significant amount of gallium. Lately, however, the Biden Administration has been foreclosing minerals mining in the United States, simultaneously restricting many of the byproduct minerals which are found in conjunction with such mines.
Treasury Secretary Yellen Calls for Market Reforms in China
During U.S. Treasury Secretary Janet Yellen’s visit to China, she called for market reforms in China and criticized its recent tough actions against U.S. companies and mineral export controls. Yellen said she hoped her visit would spur more regular communication between the two countries, and said any targeted actions by the United States to protect its national security should not “needlessly” jeopardize the broader relationship. China’s Premier Li Qiang called on her to “meet China halfway” and put bilateral relations back on track. Despite talk of U.S.-China economic decoupling, recent data show that the world’s two largest economies remain deeply linked, with two-way trade hitting a record $690 billion last year. Despite that data, President Biden has said that the Chinese are not in competition with the United States.
Conclusion
China intends to impose export restrictions on some gallium and germanium products, for which it dominates the mining process, to protect its national security interests. The minerals are used in computer chips and other technologies, including weapons. The move is viewed as retaliation against U.S. export restrictions aimed at curbing China’s high-technology industries and is not expected to immediately hit global output of semiconductors and other products because strict controls on China’s behalf would be hurting its technology industry. Depending on what the United States and its allies do regarding further restrictions on China’s products will determine whether China with proceed with more sanctions.
China dominates either the mining process or the refining process of most critical minerals that are needed for green technology manufacturing and weapons production. That makes the United States dependent on an autocratic country for its green transition and the programs and policies of the Biden administration. China has developed its critical mineral industry over decades and has been posturing itself so that countries will need to depend on its supplies. If Biden wants to continue to pursue the green energy transition, he needs to have his administration work toward developing a domestic critical mineral mining and processing industry. However, he is doing much to ensure that the opposite occurs by revoking leases, delaying permits, and labeling fauna and flora as endangered.
