HONG KONG: Chinese curbs on exports of three niche metals to the United States have already rattled the market. Now, a bigger clampdown looks set to have far-reaching ramifications for supply chains feeding American defence and chip-making industries.
Beijing this month slapped a ban on US-bound exports of gallium, germanium and antimony in a tit-for-tat move in a technology trade war.
The metals are important because they have crucial uses in many Western industries from military tech to semiconductors to satellites.
The ban may seem symbolic at first, given restrictions imposed more than a year ago had wiped out direct exports of Chinese gallium and germanium to the United States.
That pushed up prices and made it harder for traders to source buffer stocks. Yet panic levels are rising, because this time Beijing could crimp supplies further with rules prohibiting foreign companies and countries from helping US manufacturers to evade the controls.
For instance, the measures could prevent international firms from reprocessing Chinese gallium, germanium and antimony in third countries, and then selling those products into the United States.
End buyers of those metals – such as the chip, aerospace and defence 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.
Chinese metal that has been reprocessed elsewhere and re-routed to the United States has offered a lifeline for American manufacturers, particularly in the gallium market. But those flows will probably dwindle as suppliers fear reprisals from Beijing, according to people with knowledge of the trade, who asked not to be identified due to the commercially sensitive nature of the matter.
The tiny size of those markets and limited companies participating in them mean such sales would be easy to track, and being blacklisted by China would have huge repercussions for firms involved, the people said.
It will be relatively easier for China to stop gallium shipments via third countries, given it’s a niche market, said Uchi Wakaaki, director of overseas business at Wing Co, Japan’s largest importer of the metal.
Wing’s imports from China have halved this year due to the knock-on impact of trade curbs, he said.
The impact on supply chains will vary, but traders, analysts and suppliers broadly expect Beijing’s ban to materially tighten global markets and boost metal prices in the coming months.
Prices are already high. Germanium –which is over 300 times more expensive than copper – and antimony have hit records, while gallium is at a 13-year high, data from Fastmarkets show.
Chipmaker Intel Corp said the ban won’t significantly threaten production given its global supply sources. But since last year’s restrictions, several niche manufacturers in the sector have warned of risks for securing components or selling their products if they become more expensive to make.
They include French night-vision technology company Exosens SAS and Lumentum Holdings Inc, which makes lasers for the semiconductor, defence and renewables sectors.
AXT Inc, a semiconductor manufacturer that produces gallium products in China to supply US plants, said in some cases the government hasn’t issued export licences, and shipments have been delayed.
Exosens and Lumentum didn’t respond to requests for comment about the impact of this month’s ban. A spokesperson for AXT also didn’t respond to an email requesting comment, and a message left on the company’s general voicemail wasn’t replied to.
In the longer term, industry insiders said 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.
It’s the dominant supplier of dozens of critical minerals, but analysts and traders are focusing on ones that have key applications in the defence sector, and which the United States doesn’t produce in meaningful volumes. — Bloomberg
