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Two semiconductor metals with an industry-estimated combined global consumption of around 800 tonnes per year, and with critical uses in internet infrastructure, are casting a long shadow over the US-China trade and technology war while the industry wrestles with the potential implications of new export controls in China.
Buying activity for gallium and germanium metal was paralyzed on Wednesday July 5, the first full day of trading in the US after China’s Ministry of Commerce announced new export controls on those materials. From August 1, Chinese exporters of these metals will need to apply for licenses and to disclose more information about customers.
The timing of the announcement, just ahead of a visit to China by US Treasury Secretary Janet Yellen, and a day after the announcement of fresh export curbs on advanced chipmaking equipment, led some market participants to conclude that China’s move was more symbolic than driven by practicalities.
“It is [notable] that [China] waited for our Independence Day [on July 4] to demonstrate our co-dependence,” a US trader said.
Legislation restricting Chinese exports has been in place for some time. Beijing introduced a new export control law in October 2020, but the highly public nature of the latest announcement, and the August 1 deadline, have created enormous uncertainty.
“The requirements are not clear yet,” a Chinese trader said. “We do not know exactly what the government will require, but we will try our best to secure an export license.”
A Western industry commentator described the situation as “weaponized uncertainty.”
Fastmarkets assessed the price for gallium 99.99% Ga min, in-whs Rotterdam, at $265-301 per kg on Wednesday, up from $250-265 per kg on June 30.
The corresponding price assessment for germanium 99.99% Ge, in-whs Rotterdam, narrowed upward to $1,350-1,400 per kg on July 5 from $1,300-1,400 per kg on June 30.
Gallium and germanium have long histories in the semiconductor industry. The world’s first computer chip was made in 1958 from germanium, although it was quickly superseded by the far cheaper and more plentiful silicon.
More recently, gallium was the first metal to gain widespread adoption, in the form of gallium arsenide, in a new and rapidly evolving class of materials called compound semiconductors.
Today, silicon is the principal source of semiconductor material, with production concentrated in Japan. But material science has advanced at breakneck speed. Now, gallium and germanium share a host of high-tech applications from fiber optic cables and 5G telecommunications masts, to military-grade thermal imaging, lasers, light-emitting diodes (LEDs), satellite solar panels and rare-earth magnets in the engines of electric vehicles (EVs).
“If something is classed as ‘critical’ it does not [necessarily] mean you need a lot of it, it [just] means you absolutely must have it,” an industry observer said.
China supplies and consumes most of the world’s gallium metal, at a rate of 600-700 tpy, a fact that has long been understood by the US semiconductor industry.
“The US depends on foreign sources for 100% of its gallium, with China producing around 95% of the global supply,” a Presidential Executive Order issued on September 30, 2020, said. “Gallium-based semiconductors are indispensable for cellphones, blue and violet LEDs, diode lasers and fifth-generation [5G] telecommunications.”
The EV industry needs gallium metal to add to high-performance neodymium-iron-boron rare-earth magnets in engines. Demand has been growing and is now around 130 tpy, according to industry estimates. China takes most of this for its magnet industry, with Japan consuming around 30 tpy.
The situation for germanium metal is more nuanced, with substantial primary supply outside China from Canadian zinc producer Teck Resources.
As well as uses in electronics, germanium has strategic infrastructure applications in fiber optic cables, which use germanium tetrachloride to reduce losses, and germanium lenses, for high-specification thermal-imaging systems with wide-ranging military and civilian applications.
China supplies 60-70% of the world’s germanium, with demand around 150-160 tpy. The US needs around 20-30 tpy, industry sources have estimated.
Both metals are actively recycled in the US and Europe. Suppliers include Canadian firm Neo Performance Materials, US-based Indium and Belgium’s Umicore.
The US government imposed tariffs on imports of Chinese gallium, and many other metals and compounds, at the start of the US-China trade and technology war in 2018.
Germanium chemicals and oxides were also subject to tariffs but germanium metal was not.
The tariffs started at 10% and later rose to 25%, where they remain today. Although this was intended to “create a level playing field,” industry commentators have complained that they have increased the burdens on US manufacturers but have not increased the supply of critical metals and materials.
Gallium and germanium are both by-products of much larger and more lucrative industries. Gallium is a by-product of the aluminium industry while germanium is found in some zinc and copper ores, and in China is extracted from fly ash coal.
The small size of their markets is seen as a barrier to growth.
“Why does China control 97% of the world’s gallium? Because the government requires all the alumina refineries to extract the gallium produced as a by-product in the Bayer process,” a speciality metals expert told Fastmarkets.
“We need a smart industrial policy that incentivizes companies to extract the full value from ores. Critical minerals should not go into waste piles just because they are not the primary metal being mined,” the expert added.
In other industry developments, zinc producer Nyrstar, bought by Trafigura in 2019, last year unveiled a proposed $150 million expansion of its plant at Clarksville, in the US state of Tennessee, to include recovery and processing facilities for germanium and gallium.
“We are currently discussing the potential development with relevant government entities, in order to finalize the business case and move forward with this investment as soon as practically possible,” the company told Fastmarkets this week.
Participants in other critical raw material markets are taking notice of China’s export curbs.
Cobalt and nickel producer Jervois Global has spoken out against what it describes as China using its market dominance “to choke off key materials for advanced chips.”
“America, with no meaningful stockpile/inadequate mining/refining, can currently do little,” the company said in a social-media post.
It has, however, received US government funding to conduct mineral resource drilling as a “critical step in efforts to decrease reliance on overseas sources of strategic and critical minerals.”
In May the Biden administration asked Congress to amend the law to add Australia and the UK to the Title III provisions of the Defence Production Act (DPA). The DPA authorizes investments in companies in the US and Canada that maintain, expand or restore industrial base capabilities. Title III funding has been provided to a wide range of projects in the technology and critical minerals space, including gallium nitride and rare earths.
“This would streamline technology and industrial base collaboration,” a White House statement said.
(This report has been updated to include new information in the 34th and 35th paragraphs.)