China’s export controls on crucial semiconductor materials are reportedly hitting the supply chain, with concerns rising over potential shortages of advanced chips and military optical hardware.

According to the U.S. Geological Survey, China produces 98% of the world’s gallium and 60% of its germanium. However, since July of last year, the Chinese government has imposed export restrictions on these minerals, causing their prices in Europe to nearly double over the past year. China claims these measures are to protect national security and interests in response to U.S. export sanctions.

As per a report from the Financial Times, an industry source who works at a large consumer of semiconductor materials has revealed that the situation with China is extremely critical, with significant reliance on China’s supplies.

Affected companies have also disclosed that while there is still some bulk shipment of Chinese gallium, the overall export volume has dropped by about half since the controls were implemented. If China continues to reduce gallium exports as it did in the first half of the year, reserves could be depleted, leading to shortages.

Per the same report from Financial Times, Jan Giese, Senior Manager at Frankfurt-based trading firm Tradium, noted that the gallium and germanium his company obtained through China’s new export licensing program account for only a small portion of past purchases. These export controls are adding additional pressure on markets outside China, making an already challenging market even more complex.

Gallium and germanium are crucial for semiconductor applications, military, and communications equipment. They are essential materials for producing advanced microprocessors, optical fiber products, and night vision goggles, so ongoing export restrictions by the Chinese government could hinder the production of such items.

Meanwhile, the Chinese government has announced new export restrictions on antimony this month. Antimony is used in armor-piercing ammunition, night vision goggles, and precision optical components. This follows previous export controls on graphite and rare earth extraction and separation technologies.

Under the regulations, each shipment requires approval, which takes 30 to 80 days and involves uncertainty, making long-term supply contracts impractical. Applications must specify the buyer and intended use.

The report cites sources in the semiconductor materials sector, noting that China is using these restrictions to catch up with the U.S. and other semiconductor technology leaders. Given the current global situation and U.S.-China relations, there seems to be no motivation for China to ease export controls.

Addressing the matter, the China’s foreign ministry declined to comment.

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On August 15, China’s Ministry of Commerce announced restrictions on the export of the strategic mineral antimony for national security reasons, set to take effect on September 15, 2024. According to sources cited by the Commercial Times, the market price of antimony could skyrocket to USD 30,000 per ton.

Antimony is strategically significant due to its extensive applications in solar photovoltaics, batteries, fireproof materials, military equipment, and even nuclear weapons.

Meanwhile, as per data from the U.S. Geological Survey (USGS), China is the world’s largest producer of antimony, with a production of 83,000 tons last year, accounting for 48% of the global supply. Other major producers include Myanmar, with 4,600 tons annually, Turkey with 6,000 tons, and Tajikistan with 21,000 tons.

The report from Asia Financial on August 17 indicated that around 20% of the world’s antimony is used in manufacturing solar photovoltaic glass to enhance the performance of solar cells. Most of the remaining supply is used in lead-acid batteries.

Additionally, antimony has growing strategic importance due to its role as a key material in military equipment such as nuclear weapons, infrared missiles, and night vision devices, as well as a hardening agent for bullets and tanks.

As a result, the global supply of antimony is facing a shortage. Reportedly, since the beginning of this year, the price of this rare metal has already doubled, with current trading prices exceeding USD 22,000 per ton, setting a historic high.

Chetan Soni, president of the UK-based Commodity Research Unit (CRU), stated that given the current historical high prices, China’s recent announcement could further drive up prices. He added that prices might reach USD 30,000 per ton as buyers seek to secure future production or stockpile materials.

Soni believes that if antimony prices rise again, it will increase the Western world’s dependence on China’s critical minerals, including rare earths, gallium, and germanium, which have also faced export restrictions since last year.

Part of the market supply tightness may be due to disruptions in Russian supply, caused by sanctions imposed after Moscow’s invasion of Ukraine in February 2022, as well as a reduction in domestic production in Russia.

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