China Restricts Export On 2 Minerals That Could Damage Economy

Communist China announced this week new plans to restrict the export of two minerals critical to the production of electric vehicles, solar panels, military hardware, and more.

The minerals — gallium and germanium — and dozens of other related metals will be subject to new export regulations that are aimed at punishing the West for restricting China’s ability to access advanced semiconductors.

China dominates the global market as leading producer for both of the minerals, an advantage that they gained by “suppressing the price,” according to Christopher Ecclestone, principle at the natural resource research firm Hallgarten & Co. When they stop suppressing the price, “it suddenly becomes more viable to extract these metals in the West, then China again has an own-goal,” Ecclestone said.

“For a short while they get a higher price, but then China’s market dominance gets lost – the same thing has happened before in other things like antimony, tungsten and rare earths,” he added.

Gallium is a soft metal that is used in aerospace applications, consumer goods, industrial equipment, military equipment, medical equipment, and telecommunications equipment, according to the U.S. Geological Survey. Germanium is used in the production of solar cells and fiber optics.

One Chinese semiconductor said that they thought the the move could backfire on China. “It may affect the business of Chinese manufacturers instead during the economic downturn, but with a limited impact on the international market in the short term,” the executive said.

The Eurasia Group said that the move by China was “a warning shot, not a death blow.”

“But these latest measures are more limited in scope, and while the new rules require Chinese exporters to first obtain a license, no language automatically bars export to specific countries or end-users,” the group said. “It is a shot across the bow intended to remind countries including the United States, Japan, and the Netherlands that China has retaliatory options and to thereby deter them from imposing further restrictions on Chinese access to high-end chips and tools.”

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Some experts said that the move would have little-to-no impact — in terms of what consumers notice — over the course of the next year because existing stockpiles will fill the gap. They cautioned that if the dispute carries on longer than a year than a ripple effect will be felt.

Others said that the move will “will have an immediate ripple effect on the semiconductor industry, especially with regards to high-performance chips.”