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Luisa Moreno, president of mining company Defense Metals Corp., expects China to impose more restrictions on exports of minerals that could include rare earths.
Jacob Borzycki | Norphoto | Getty Images
China’s metal export restrictions on gallium and germanium may motivate some countries to diversify their supply chains away from China.
“This may be a wake-up call for some (countries) to gradually increase production elsewhere,” Stuart Randall of Shanghai-based consultancy Intralink told CNBC.
“While China never did anything, most of the world would be perfectly happy to continue to rely on China,” said Randall.
China’s commerce ministry announced last week that it had restricted exports of two metals – gallium and germanium – key to semiconductor manufacturing from August 1, in what is seen as a warning to Europe and the United States in a technology war over advanced chips. .
China produces 60% of the world’s germanium and 80% of gallium, based on data from the Critical Raw Materials Alliance, an industry body.
We will likely continue to see (export restrictions) and it will likely affect other materials such as rare earths, which again China controls more than 85% of production…
Luisa Moreno
President of the Defense Metals Company
Both the European Commission and the United States Expressed concern around china planned restrictions.
“China’s halt to mineral 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 impose more restrictions on exports of minerals that could include rare earths.
Rare earth elements are essential for high-tech consumer products such as smartphones and military equipment such as radar systems. form rare earths Set of 17 items It consists of scandium, yttrium, and lanthanides.
“We’re likely to continue to see (export restrictions) and it’s likely to affect other materials such as rare earths, which again China controls more than 85% of production,” Moreno said on CNBC’s “Street Signs Asia” on Tuesday.
In 2010, China halted rare earth exports to Japan after a territorial dispute. China also threatened to stop exports of rare earth elements to the United States in 2019.
“(The effect of metal restrictions) is not that big in the short term, but if the Chinese impose (other critical materials restrictions), it will be a long-term problem,” said Wang of Counterpoint.
“China also has to be careful because blocking exports could harm Chinese companies and they will lose their foreign customers,” said Randall of Interlink.
Diversification away from China
A major material supplier said factories are preparing to start producing gallium. The two metals targeted in China’s upcoming curbs are not found naturally, and instead are typically created through the process of refining other minerals.
“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 supplies,” said Ross Berntson, president and chief operating officer of Indium Corporation. Squawk Box Asia on CNBC Wednesday.
Indium provides key materials such as gallium and germanium to global electronics and chip companies.
“There are about 10 plants that can run gallium production right now… and if we can get those production units up and running, we’ll have ample gallium in other geographies besides China,” Berntson said.
While China produces the majority of gallium and germanium in the world, it is not the only producer.
Russia, Ukraine, Japan and South Korea too Gallium productionaccording to a 2021 Indian government study. Canada, Germany, Japan, Slovakia, and the United States recycle gallium from new scrap.
Meanwhile, Belgium, Germany and Russia can Manufacture of germanium, based on data from the US Geological Survey. The United States can also recycle new and old scrap germanium.
“Metals like gallium and germanium are not unique metals. China is a major supplier of these metals and this helps keep metal prices down,” said John Strand of telecommunications advisory firm Strand Consult.
“My view is that even if they crack down here, it’s going to be more of an impact on prices than an impact on aggregate supply,” Kelty Williams, a partner at law firm Akin Gump Strauss Hauer & Field, said on CNBC’s Squawk Box. Asia” on Tuesday.
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