His iron control over gallium and germanium has doubled the price since 2023.

China’s control over rare earths is already paying off. The country, led by Xi Jinping, dominates the industry with uncontested force. In fact, over the years, it has produced more than 90% of the precious resource, according to the U.S. Geological Survey. In 2022, its market share fell to 70%but did not do so because of declining production; the reason for this decline was the increase in production quotas in Australia, Vietnam and Myanmar, as well as in other countries.

This unique group of chemical elements includes some metals that are as elusive and have such meaningful names as neodymium, promethium, gadolinium, yttrium or scandium and others. Some of them are relatively rare and, moreover, are not usually found in pure form in nature, but their physical and chemical properties make them special.

Its properties are beyond the reach of other elements in the periodic table, which has led to it becoming a very valuable resource in many industries in recent decades, but especially in electronics and renewable energy. And they are involved, for example, in the production of hybrid and electric vehicle engines, batteries, catalysts, lasers, optical fibers, LCD panels and even wind turbines.

Gallium and Germanium Prices Skyrocket

On December 21, the Xi Jinping administration decided to restrict the export of some of its rare earth processing technologies, in a clear move to protect its strategic interests in the midst of a confrontation with the United States and its allies. In the current situation, the United States, Europe, Japan and Australia seem unwilling to maintain this dependence on China any longer. One strategy under consideration is to reduce the use of rare earth elements as much as possible, replacing them with other raw materials.

Gallium and germanium are in a particularly delicate position. China is fully aware of the importance of these chemical elements for microelectronics and renewable energy. In this context, the introduction of restrictions on their exports at the end of 2023 almost immediately caused disruption of the global supply chainand prices rose significantly shortly thereafter. It’s not for nothing that China produces about 94% of the planet’s gallium. In practice, the price of germanium rose from $1,200 per kg in the first quarter of 2023 to $2,600 per kg in the third quarter of 2024.

Gallium has increased slightly less in price, but the difference is still significant. In fact, its price has increased from about $300 per kg in early 2024 to about $530 per kg today. As of August 1, 2023, Chinese manufacturers must obtain an export license if they want to export the chemical elements we discussed in this article and their derivatives from China.

Xi Jinping’s government justifies this strategy on national security grounds, but in the medium term it could have dangerous consequences: the shortages that are already beginning to be felt could worsen the health of various industriesincluding semiconductors, consumer electronics, electric vehicles and renewable energy. It won’t take us long to see what happens.

Image | Pixabay

Further information | Financial Times

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