Luisa Moreno, president of mining company Defense Metals Corp, expects China to further restrict metal exports, which may include rare earth elements.
Jakub Porzycki | Nurphoto | Getty Images
China’s gallium and germanium export restrictions may prompt some countries to diversify their supply chains away from China.
“For some, this may be a wake-up call [countries] progressively increase production elsewhere,” Stewart Randall of Shanghai-based consulting firm Intralink told CNBC.
“While China never did anything, a lot of the world can be perfectly blissful to proceed to depend on China,” Randall said.
China’s commerce ministry announced last week that it was restricting exports of two metals – gallium and germanium – key to semiconductor production, effective August 1, in a move seen as a warning to Europe and the US in the tech war over advanced integrated circuits.
China produces 60% of the world’s germanium and 80% of gallium, based on industry organization Critical Raw Materials Alliance.
We’ll probably still see one another [export restrictions] and can likely affect other materials corresponding to rare earth elements which again, China controls over 85% of production…
Luisa Moreno
President of Defense Metals Corp
Each the European Commission and the USA expressed concern about Chinese planned curbs.
“China’s halt to metal exports is definitely a warning. It reminds European countries that they will need to have their very own supply chains,” Brady Wang, deputy director of Counterpoint Research, told CNBC.
China may introduce more restrictions
Luisa Moreno, president of mining company Defense Metals Corp, expects China to further restrict metal exports, which may include rare earth elements.
Rare earth elements are essential in high-tech consumer products corresponding to smartphones and military equipment corresponding to radar systems. Rare earth elements form group of 17 elements consists of scandium, yttrium and lanthanides.
“We’ll probably proceed to see one another [export restrictions] and can likely affect other materials corresponding to rare earth elements, which again, China controls greater than 85% of production,” Moreno said Tuesday on CNBC’s “Street Signs Asia.”
![Expect China to cut metal exports even further, which could include rare earths, the mining company says](https://image.cnbcfm.com/api/v1/image/107270022-16891268781689126876-30263568924-1080pnbcnews.jpg?v=1689129569&w=750&h=422&vtcrop=y)
In 2010, China halted exports of rare earth elements to Japan over a territorial dispute. China has also threatened to halt rare earth exports to the US in 2019.
“[The impact from the metals curbs] it is just not big in the short term, but when the Chinese will impose [curbs on other critical materials]this can be a long-term problem,” said Wang of Counterpoint.
“China also must watch out because blocking exports could hurt Chinese corporations in addition to lose foreign customers,” said Randall of Intralink.
Diversification away from China
One supplier of key materials said factories were preparing to begin producing gallium. The 2 metals that China’s future curbs will address are usually not naturally occurring and are typically created by refining other metals.
“We get a whole lot of calls from our customers, there’s a whole lot of activity there. We’re committed to the market to make sure we are able to secure supply,” said Ross Berntson, president and chief operating officer of Indium Corporation. Wednesday on CNBC’s “Squawk Box Asia.”
Ind supplies key materials corresponding to gallium and germanium to global electronics and chip corporations.
“There are about 10 factories that might start producing gallium without delay… and if we are able to get those production units up and running, we’ll have enough gallium in other regions outside of China,” Berntson said.
![About 10 factories can now incorporate gallium production, the metalmaker says](https://image.cnbcfm.com/api/v1/image/107270038-16891322271689132224-30264385276-1080pnbcnews.jpg?v=1689135615&w=750&h=422&vtcrop=y)
Although China produces a lot of the world’s gallium and germanium, it is just not the one producer.
Russia, Ukraine, Japan and South Korea as well produce galCanada, Germany, Japan, Slovakia and the USA recycle gallium from recent scrap, based on a 2021 study by the Indian government.
Meanwhile, Belgium, Germany and Russia can produce germanium, based on data from the US Geological Survey. The US can even recycle recent and old scrap into germanium.
“Metals like gallium and germanium are usually not exceptional metals. China is a significant supplier of those metals, which helps keep their price down,” said John Strand of telecommunications consultancy Strand Seek the advice of.
“In my view, even in the event that they crack down vigorously here, it will have an even bigger impact on prices than the general impact on supply,” Clete Willems, a partner at law firm Akin Gump Strauss Hauer & Feld, told CNBC’s “Squawk Box.” Asia” on Tuesday.