On Tuesday, July 4th, the non-ferrous metals sector opened with a sharp rise. Yunnan Germanium, Chihong Zinc, and LPXD all hit the limit up, while ZHUZHOU SMELTER, Huludao Zinc, Nonfemet, and CHALCO all opened higher.
On the news front, China announced export controls on gallium and germanium. China has always played an important role in the global rare metals industry, not only because of its abundant reserves but also because it is a major global supplier.
On July 3rd, the Ministry of Commerce and the General Administration of Customs issued a notice announcing the implementation of export controls on gallium and germanium-related items, which will officially take effect on August 1, 2023.
What is the purpose? Why is China important in this field? This article aims to better understand the impact of gallium and germanium export controls by addressing six key questions.
<h2>What happened?</h2>
According to Notice No. 23 of 2023 issued by the Ministry of Commerce and the General Administration of Customs regarding the implementation of export controls on gallium and germanium-related items, in order to safeguard national security and interests, and with the approval of the State Council, it has been decided to implement export controls on gallium and germanium-related items in accordance with the relevant provisions of the Export Control Law of the People's Republic of China, the Foreign Trade Law of the People's Republic of China, and the Customs Law of the People's Republic of China.
Items that meet the relevant characteristics, such as gallium-related items (metallic gallium, gallium nitride, gallium oxide, gallium phosphide, gallium arsenide, indium gallium arsenide, gallium selenide, gallium antimonide) and germanium-related items (metallic germanium, zone-refined germanium ingots, germanium phosphide zinc, germanium epitaxial growth substrates, germanium dioxide, germanium tetrachloride), shall not be exported without permission.
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Exporters who wish to start or continue exporting will need to apply for a license from the Ministry of Commerce and provide detailed information about the overseas buyers and their applications.
The Ministry of Commerce shall review the export application documents upon receipt, or conduct a review in conjunction with relevant departments, and make a decision to grant or deny the license within the statutory time limit. For the export of items listed in this notice that have a significant impact on national security, the Ministry of Commerce, in conjunction with relevant departments, shall report to the State Council for approval.
This regulation will officially take effect on August 1, 2023.
<h2>What are gallium and germanium?</h2>
Gallium and germanium are typically classified as &#34;minor metals.&#34; These metals are usually not found separately in nature but are produced as by-products in refineries at low concentrations. These refineries primarily focus on more mainstream raw materials such as zinc or alumina.
Gallium is a rare metal with a low melting point and a high boiling point, earning it the reputation of being the &#34;backbone of the electronics industry.&#34; Gallium has characteristics such as high electrical conductivity, moderate thermal conductivity, and low toxicity in its liquid state. It is a promising raw material for the synthesis of intelligent functional materials and can easily form low-melting-point alloys with many other metals.
Germanium, on the other hand, is one of the most dispersed elements in the Earth's crust and is considered an important strategic resource included in the strategic reserves of many countries. Germanium has properties such as affinity for rocks, iron, sulfur, and organic matter, as well as excellent optical properties such as high infrared refractive index and low dispersion, and excellent mechanical properties.
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The main sources of raw materials for these minerals are lignite germanium ore, by-products of lead-zinc smelting, germanium ingots, and waste from germanium monocrystals. Currently, there are 26 known germanium-bearing minerals, with germanite and germanium being the most common, followed by germanite and argentopyrite.
<h2>What are the uses of gallium and germanium?</h2>
Gallium and germanium, as important rare metals, are widely used in the fields of semiconductor materials and new energy. Among them, gallium is known as the &#34;new staple food of the semiconductor industry,&#34; and germanium is also an important semiconductor material.
The consumption areas of metallic gallium include semiconductors and optoelectronic materials, solar cells, alloys, medical devices, magnetic materials, etc. Among them, the semiconductor industry has become the largest consumer of gallium, accounting for about 80% of the total consumption. With the rapid development of downstream industries, especially the semiconductor and solar cell industries, the demand for metallic gallium will also steadily increase.
Among them, gallium compounds are high-quality semiconductor materials, widely used in the optoelectronics industry and microwave communication industry, for the manufacture of microwave communication and integration, infrared optics and infrared detectors, integrated circuits, light-emitting diodes, etc.
Among the related products of gallium, gallium nitride (GaN) is one of the most representative materials, and it is currently the most advanced semiconductor material in the world. Gallium nitride has a wider bandgap, higher breakdown field, higher thermal conductivity, higher electron saturation rate, and better radiation resistance. It has broad application prospects in fast charging for mobile phones, 5G communication, power supplies, new energy vehicles, LED lighting, radar, and other fields.
Arsenide gallium (GaAs), which is included in export controls, is a representative of second-generation semiconductor materials, and it plays a major role in the development of microelectronic devices such as high-frequency, high-speed, high-temperature, and radiation-resistant devices.
Metallic gallium is not only regarded as one of China's strategic reserve minerals but has also been included in the strategic or critical mineral lists of developed regions such as the European Union, the United States, and Japan.
It is worth mentioning that gallium has been considered a strategic and critical metal since World War II, and its use in strategic industries may still have far-reaching implications for restrictive measures.
Germanium is also an important semiconductor material with extensive and important applications in fields such as semiconductors, aerospace measurement and control, nuclear physics detection, fiber optic communication, infrared optics, solar cells, chemical catalysts, and biomedicine.
Germanium has been included in the national strategic mineral list and is a key mineral relied upon by important industries such as the new generation of information technology, artificial intelligence, and robotics.
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<h2>How important is China's role?</h2>
Both gallium and germanium, in terms of reserves and exports, China occupies a leading position globally.
In terms of gallium metal, according to data released by the United States Geological Survey (USGS), the current global reserves of gallium metal are about 279,300 tons, with China having the highest reserves of 190,000 tons, accounting for approximately 68% of the global reserves.
In terms of production, China has the highest proportion of gallium production in the world. Germany and Kazakhstan ceased gallium production in 2016 and 2013 respectively (Germany announced in 2021 that it will restart primary gallium production by the end of the year), while Hungary and Ukraine ceased gallium production in 2015 and 2019 respectively. China's proportion of global gallium production continues to rise, and as of 2021, it has exceeded 90% of global gallium production.
As for germanium metal, according to USGS data, China accounts for 41% of global germanium resources, while the United States accounts for 45%. The global primary germanium production in 2021 is about 130 tons, of which China and Russia account for 70% of the global production. China is the world's largest producer of germanium, accounting for 68% and supplying 68.5% of global germanium over the past decade.
China is a major country in terms of germanium resource reserves and consumption. After years of development, the germanium industry chain layout has gradually improved, with germanium processing enterprises mainly focusing on deep processing links such as germanium dioxide, germanium tetrachloride, and zone-refined germanium ingots.
At the same time, China is one of the important exporting countries of germanium oxide and germanium dioxide in the world. From the distribution of export destinations, the main destinations for China's germanium oxide and germanium dioxide exports include Japan, France, Spain, Germany, South Korea, Italy, the United States, and other countries.
<h2>What is the impact of control measures?</h2>
Analysts point out that China may strictly control the production and export volume of gallium and germanium, which may lead to significant changes in the global gallium and germanium market trade structure. The export quotas for gallium and germanium in China may be reduced, and it is not ruled out that the prices of related products may rise. In addition, the analysis agency CRU Group in the metal industry also pointed out that seeking alternatives may cost more and may hinder technological performance.
Guojin Securities pointed out that as one of the countries with the largest reserves and production of gallium and germanium in the world, the export control measures implemented by China on gallium and germanium-related items may have the following impacts: domestic GaAs substrate epitaxy, raw materials, etc. may be reduced in price, while overseas GaAs substrates and raw materials may experience price increases and supply shortages, increasing pressure on overseas substrate manufacturers.
According to a report by Baichuan Yingfu, the price of metal gallium (4N) at the end of May was 1675 yuan/kg, with an average monthly price of 1718 yuan/kg; the price of high-purity gallium (6N) was 1825 yuan/kg, with an average monthly price of 1868 yuan/kg; the price of high-purity gallium (7N) was 1975 yuan/kg, with an average monthly price of 2018 yuan/kg. The price of metal germanium at the end of May was 9550 yuan/kg, with an average monthly price of 9460 yuan/kg, and the price of germanium dioxide was 6300 yuan/kg, with an average monthly price of 6300 yuan/kg, remaining stable compared to the previous month.
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Germanium and gallium are both emerging strategic minerals that are widely used in semiconductor materials, new energy, and other fields. They are listed in the national strategic mineral list. Moreover, China occupies a leading position globally in terms of both metal reserves and exports.

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