Andy Home: A gallium-lens on China's mineral dominance, and how to end it

Since China began restricting the export of exotic metals in August 2023, the price of gallium is on an upward trend.

It is not surprising that China holds a near-monopoly in the global production of gallium, as well as across a wide range of critical materials.

What should we do about the fact that a commodity most people never heard of has reached a 14-year high?

According to the United States Geological Survey, the global production for last year was only 760 metric tonnes. The world market is worth only $550 million, even at the current high prices.

Metal is used in so small quantities that it has no impact on the price of a cell phone or electric vehicle.

If you are in the semiconductor industry, it is important. It's even more important to U.S. defense planners. That's why China selected element 31 as a metal pressure point.

The Multiplier Effect

The economic impact of China's export bans is multiplied by the fact that gallium is used to make so many gadgets.

USGS estimates a suspension of Chinese exports for a year would result in a hit to the U.S. economic system of $3.1 billion.

The semiconductor industry would account for about half of this decrease, while the remaining half will come from downstream industries like computers, printed circuit assemblies and electric vehicles.

China hasn't completely suspended exports but has banned direct sales into the United States. Outbound flows are down since 2023, when dual-use regulations came into effect.

The USGS projections also assumed that gallium prices would increase by more than 2,5 in the event of an export stop.

Gallium prices have more than doubled since July 2023, when they were $350 per kilogram. They are now $725 per kilogram and still increasing.

As more gallium is kept on the Chinese market, the Chinese price falls. Other times, physical arbitrage could close the price gap. But not when China's Ministry of Commerce is guarding the gate.

THE MILITARY ANGLE

Gallium is of even greater importance to U.S. military planners.

The U.S. Defense Advanced Research Projects Agency, or DARPA, was responsible for the development of a compound known as gallium arsenide. This compound is used in precision-guided and radar weapons. More recently, DARPA has been involved with the development of the next-generation semiconductor chip, gallium nitride.

According to The Center for Strategic and International Studies (a non-profit research organization), the latter "revolutionizes modern radar by allowing new modules to track smaller and faster threats, and to be more numerous from a distance nearly doubled."

The U.S. Army is deploying gallium nitride-enhanced Radars in its Lower-Tier Air and Missile Defense Sensors (LTAMDS), which are an integral part Patriot missile defence units, and F-35 Joint Strike Fighter.

There's likely a lot more we don't even know.

Gallium, like many other critical metals, has a small market but a wide range of applications. Many of these are at the forefront of semiconductor design.

It's not a coincidence that China announced their export controls as a direct response to U.S. sanctions on next-generation chip imports to China.

THE CHINA CHALLENGE

Can the West sever China's grip on gallium?

The solution to the problem is right in front of us, or better yet, in the tailings pool.

Gallium isn't particularly rare on the surface of the Earth, but it only occurs at concentrations high enough to be extracted as a byproduct from other minerals.

China's gallium dominance has increased along with its massive expansion of aluminum capacity. China accounts for 60% global aluminium production and all of that metal requires alumina which is produced from bauxite.

Gallium can be produced by other refineries than China's. Western companies have stopped producing gallium after China took over the market in the first decade of this century.

That's changing.

Rio Tinto and Indium Corporation just announced that they had successfully extracted pure gallium out of a waste stream from Rio's Vaudreuil Alumina Refinery in Quebec. The next step will be to build a pilot plant that can produce 3.5 tons of gallium per year.

METLEN, a Greek aluminium manufacturer, plans to increase its bauxite-and-alumina processing capability to 50 tons annually by 2028. This is one of 47 strategic mineral projects in the European Union.

Two key lessons can be learned from this article for other mineral markets that are being affected by Chinese export restrictions.

First, it is likely that the West already produces many of these materials but has not appreciated their value until now.

Rio Tinto has begun extracting tellurium and scandium at its Kennecott Copper Smelter, Utah, as well as titanium from its operations in Quebec.

The two plants had been in operation for several years before anyone thought it necessary to separate the metals from the waste stream.

Second, it's clear that Western operators have to learn or, in the case gallium, re-learn the processing technologies needed to separate them and refine them.

It will take some time, especially since China restricts the export of this technology in many cases.

The higher prices that result from China's export restrictions are encouraging more and more Western companies back to metallurgy.

The author is a columnist at

(source: Reuters)