China’s Metal Clampdown Threatens to Upend US Defense and Chip-Making Industries
A recent ban on exports of three niche metals to the US by China has sent shockwaves through the market, with far-reaching implications for supply chains feeding American defense and chip-making industries. The metals in question – gallium, germanium, and antimony – are crucial components in many Western industries, from military tech to semiconductors to satellites.
The Ban’s Impact on Supply Chains
The ban may seem symbolic at first, given restrictions imposed over a year ago had already wiped out direct exports of Chinese gallium and germanium to the US. However, this time Beijing could crimp supplies further with rules prohibiting foreign companies and countries from helping US manufacturers evade the controls. This could prevent international firms from reprocessing Chinese gallium, germanium, and antimony in third countries and then selling those products into the US.
End Buyers Scramble for Alternatives
End buyers of these metals, such as the chip, aerospace, and defense sectors, may have little choice but to try to use less, recycle more, or strike deals with the few Western companies who can potentially start new production. There are also worries that other critical materials could be targeted if tensions escalate.
Gallium: A Niche Market Under Threat
Gallium is a tiny market, with annual output totaling less than 1,000 tons, and China producing virtually all of it. The nation’s dominance in gallium production makes it an attractive target for Beijing to flex its muscle. International producers could, in theory, raise gallium production by investing in ways to extract it as a byproduct, but they are hesitant to do so without commitments from US and European governments to fund projects.
Germanium: A Market in Crisis
Germanium is another example of how trade restrictions are shutting international merchants out of the market, reducing their role as suppliers of last resort. Alongside a handful of Chinese producers and a few alternative ones overseas, supplies of minor metals have traditionally been controlled by a group of specialist traders. But since China’s restrictions last year, many have been frozen out of the affected metals, with customs officials only approving shipments to established end users.
Antimony: A Critical Metal in Short Supply
Antimony, widely used in munitions, has been oversupplied for much of this century as China’s rapid industrial expansion boosted output. However, that has been changing in recent years as the country’s geological reserves shrink. While illicit exports via Vietnam in the past helped ease supply squeezes, better border monitoring and supply chain auditing by Western manufacturers have seen so-called border leakages drop in recent years.
The Future of Critical Minerals
Industry insiders say the challenge will be securing new or alternative supplies and finding refiners who can transform them into extremely pure forms that manufacturers need. There’s also the question of whether China could target other commodities, such as hafnium, zirconium, tungsten, titanium, and indium, which have key applications in the defense sector and which the US doesn’t produce in meaningful volumes. As tensions between the US and China continue to escalate, the future of critical minerals hangs in the balance.
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