**Global Gallium Prices Surge as China Implements Export Controls**
Global gallium prices experienced a significant increase of 27% this week as a response to China’s decision to control exports of the niche metal. This move by Beijing is seen as a retaliation against recent trade restrictions targeting China’s semiconductor industry. Additionally, it aligns with the efforts of the US and Europe to reduce China’s dominance in the supply chain for critical raw materials.
**Rush to Secure Gallium Shipments Before Export Controls Take Effect**
Prior to China’s announcement, the gallium market was well supplied. However, buyers are now rushing to secure shipments before the export controls are implemented. According to an anonymous trader, the demand for gallium and germanium, which are high-value products, has increased this week. Typically, these products are produced in small volumes, and traders do not hold large stockpiles.
**Price Benchmarks for Gallium and Minor Metals**
Gallium and other minor metals are not commonly traded on futures exchanges. Instead, price benchmarks are established by publishers like Fastmarkets. These benchmarks are determined through surveys conducted by journalists who gather data from producers, consumers, and traders.
**Gallium Prices Soar, Germanium Less Affected**
The Fastmarkets data shows that gallium prices reached $326 per kilogram on Friday, a $43 increase from the previous week. This surge indicates that buyers are seeking to secure supplies before the export controls become effective next month. On the other hand, germanium, which is also subject to the restrictions, experienced a smaller impact with a price increase of 1.9%.
**Impact of Export Controls on Chinese Shipments**
The exact impact of the new export controls on gallium shipments from China is still uncertain. Starting from August 1, exporters will be required to apply for licenses from the commerce ministry to continue shipping gallium abroad. They will also need to report details of the overseas buyers and their applications. This measure aims to ensure that gallium and other metals are used for legal purposes.
**Challenges in Increasing Gallium Production Outside China**
While the export controls will encourage efforts to boost gallium supply outside of China, increasing production of gallium may be more challenging compared to germanium. Colin Hamilton, the Managing Director for Commodities Research at BMO Capital Markets, explains that this highlights the increasing strategic importance of industrial raw materials in global markets.
**Chinese Government Clarifies Export Controls**
The Chinese Ministry of Commerce Spokeswoman, Shu Jueting, has emphasized that the export controls do not amount to a ban on exports. She stated that the measures are designed to ensure the legal use of gallium and germanium. The intention is to regulate the distribution and prevent misuse of these metals.
**Gallium and Germanium’s Role in Critical Industries**
Although gallium and germanium are relatively small markets compared to metals like copper or aluminum, they play a crucial role in various critical industrial sectors. These sectors include semiconductors, solar cells, and satellites. China dominates the production of gallium and germanium, and the announcement of export controls has sparked a race to find alternative supplies.
**Potential for Increased Supply and Price Consequences**
Despite the dominance of China in gallium and germanium production, analysts have pointed out the relative abundance of these metals. The high cost of processing has been a deterrent in increasing supply outside China. However, if the export controls drive prices significantly higher, supply from other regions may become more viable. Analyst Bernard Dahdah from Natixis sees China’s export controls on gallium and germanium as a warning shot, as China possesses more metals through which it can impose more severe consequences.
– Bloomberg. (2023, July 3). [What Are Gallium and Germanium? Niche Metals Hit by China Curbs](https://www.bloomberg.com/news/articles/2023-07-03/what-are-gallium-and-germanium-niche-metals-hit-by-china-curbs).