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The price of gallium has been rising ever since China started restricting exports of the exotic metal in August 2023.

This is not surprising since China has a near monopoly on global gallium production, just as it does across the critical materials spectrum.

How much should we care that the price of something most people have never heard of is trading at 14-year highs?

After all, global production last year was just 760 metric tons, according to the United States Geological Survey (USGS). Even at today’s elevated prices the world market’s nominal value is a modest $550 million.

The metal is used in such tiny quantities that there is zero impact on the cost of a mobile phone or an electric vehicle.

However, if you’re in the semiconductor business it matters a lot. And it matters even more to US defence planners, which is why China chose element number 31 as a metallic pressure point in the first place.

The multiplier effect

Because gallium is used in so many modern technological gadgets, there is a multiplier effect to the economic cost of China’s export restrictions.

The USGS estimates that a one-year suspension of Chinese gallium exports would translate into a $3.1 billion hit to the US economy.

China’s germanium, gallium ban could cost the US $3.4 billion

Around half of the decrease would come from the semiconductor sector and the other half from a range of downstream industries such as printed circuit assembly, computers and electric vehicles.

China hasn’t totally suspended exports, although it has banned direct sales to the United States. But outbound flows have slowed since the dual-use regulations were introduced in 2023.

Moreover, the USGS’s projections were based on an assumption that the gallium price would rise by a factor of more than 2.5 in the event of a complete export halt.

The reality is that the gallium price has more than doubled from $350 per kilogram in July 2023 to $725 and is still rising.

The Chinese price, by contrast, is falling as more gallium stays in the domestic market. Physical arbitrage would at other times close the pricing gap but not with China’s Ministry of Commerce guarding the gate.

The military angle

Gallium’s significance to US military planners is greater still.

Indeed, it was the US Defense Advanced Research Projects Agency (DARPA) that helped develop a compound called gallium arsenide, used in radar and precision-guided weapons, and more recently nurtured the next-generation gallium nitride semiconductor chip.

The latter is “revolutionizing modern radar, allowing new radar modules to track smaller, faster, and more numerous threats from nearly double the distance,” according to The Center for Strategic and International Studies, a non-profit policy research organization.

Gallium nitride-enhanced radars are being deployed in the US Army’s Lower-Tier Air and Missile Defense Sensor (LTAMDS), an integral part of Patriot missile defense units, and the F-35 Joint Strike Fighter.

And there’s probably a whole lot more that we don’t know about.

Gallium is typical of many critical metals in that its small market size belies an extraordinarily diverse array of applications, many of them at the cutting edge of semiconductor design.

Which is why it’s no coincidence that China announced its export controls in direct response to US restrictions on next-generation semiconductor chips to China.

The China challenge

Can the West break China’s grip on the gallium market?

The solution is already at hand, or rather in the tailings pond.

Gallium is not particularly rare in the earth’s surface but only occurs in sufficient concentrations to extract as a by-product of other minerals, particularly bauxite.

China’s gallium supremacy has grown alongside its massive build-out of aluminum capacity. The country accounts for 60% of global aluminum output and all that metal needs alumina, which is processed from bauxite.

China’s alumina refineries aren’t the only ones that can generate gallium. It’s just that Western companies stopped doing so after China flooded the market at the start of the last decade.

That’s changing.

Rio Tinto and Indium Corporation have just announced the successful extraction of pure gallium from what was previously a waste stream at Rio’s Vaudreuil alumina refinery in Quebec. The next stage will be a pilot plant with capacity of 3.5 tons per year.

Greek aluminum producer METLEN is planning to produce 50 tons per year by 2028 as part of a project to lift bauxite and alumina processing capacity. It is one of the European Union’s 47 strategic minerals projects.

There are two key takeaways here for other critical mineral markets being squeezed by Chinese export controls.

Firstly, there is a good chance that the West is already producing many of them but has failed until now to appreciate the value of what was deemed part of the metals processing waste scheme.

Rio Tinto, for example, has also started extracting scandium from its titanium operations in Quebec and tellurium from its Kennecott copper smelter in Utah.

Rio Tinto becomes first North American producer of scandium oxide

Both had been operating for many years without anyone thinking it worthwhile to separate out the critical metals in the waste stream.

Secondly, it is clear that Western operators are having to learn, or in the case of gallium re-learn, the processing technology needed to separate and refine them.

This will take time, particularly since China is in many instances also restricting exports of such technology.

But the higher prices ensuing from China’s export controls are providing the incentive for ever more Western companies to go back to metallurgy school.

(The opinions expressed here are those of the author, Andy Home, a columnist for Reuters.)

(Editing by David Evans)