2023 – A Turbulent Year for Gallium and Germanium
New export figures for gallium and germanium show that trade in the two technology metals experienced major fluctuations in 2023 due to new Chinese export controls. Expect a challenging purchasing environment in 2024.
Frankfurt am Main, January 25, 2024 – In the summer of 2023, the Chinese Ministry of Commerce issued strict export regulations for a large number of raw materials, technologies, and products or tightened some of the existing export restrictions. The new export rules currently affect gallium and germanium products, among others. China is the largest producer of the two technology metals: according to official data, China produces more than 90 percent of global gallium and around 80 percent of germanium. The metals are used in microchips, LEDs, and solar panels. Germanium is also an important component of fiberoptic cables.
Export Controls Affect International Trade
The Ministry of Commerce announced the mandatory licensing on July 3, citing national security concerns. Gallium and germanium are so-called dual-use goods (i.e., goods that can be used for both civilian and military purposes). The rules came into force on August 1, and companies were immediately faced with long processing times for export licenses. Exports of both metals fell to almost zero, as figures from the customs authorities show. Although the first licenses were granted in September, exports didn’t pick up again until November.
Matthias Rüth, Managing Director of TRADIUM, summarizes: “We experienced a turbulent year for gallium and germanium in 2023. Supply chains were almost completely disrupted for a short time. China has once again demonstrated its dominance in the raw materials market.”
Challenges for the Purchasing Department
Against this backdrop, management consultants Deloitte also expect bottlenecks in the supply of the two technology metals in 2024. Restricted or delayed raw material exports will coincide with rising demand. For example, demand for gallium for microchips could more than double in the coming years: from 38 tons in 2018 to up to 79 tons in 2040, according to forecasts by the German Mineral Resources Agency. Demand for germanium for fiberoptic cable manufacturing is forecast to increase from 59 tons in 2018 to up to 246 tons in 2040.
Chart 1: Gallium export figures
Chart 2: Germanium export figures
However, processing companies can proactively prepare for possible shortages. One measure is to hold adequate stocks for several months. Matthias Rüth: “The risks of export restrictions and bureaucratic hurdles can be managed well by systematically increasing your stocks of critical metals. This will ensure a reliable supply of raw materials, even when just-in-time deliveries reach their limits. This procurement strategy is not very popular with companies that are usually driven by key figures. However, given the current raw materials market situation and the predicted shortages, it can quickly pay off.”
Gallium and germanium aren’t the only resources that could be in short supply in the coming months. China has also levied export restrictions on other strategic raw materials, such as the battery material graphite, in addition to antimony, silver, and tungsten. The export of certain technologies for the mining and processing of rare earths and the production of permanent magnets has also been made subject to restrictions.
