China's metal export curbs reignites global companies' hunt for stable suppliers (updated)

Nyrstar NV

05/07/2023 21:44

(Adds comments from gallium nitride chip firm Navitas in
paragraphs 16-17)
    By Brenda Goh, Supantha Mukherjee and Kanishka Singh
       SHANGHAI/STOCKHOLM/WASHINGTON, July 6 (Reuters) -
C hina's decision this week to restrict exports of some strategic
metals has prompted more companies to re-think their reliance on
the world's No. 2 economy at a time when mounting geopolitical
tensions have fed fears that more curbs could be coming.
    In a move that a top Chinese trade advisor warned was "just
a start," Beijing said on Monday it would limit exports of
products made from the minor metals of gallium and germanium to
protect national security. That followed the U.S. decision to
impose export restrictions to curb China's access to key
technologies used for artificial intelligence (AI).
    The products China cited are used in semiconductors, defense
technology and other high-tech industries. While the chipmaking
metals account for relatively modest levels of export, China's
move reignited calls across the globe for "de-risking," or
finding other countries besides China for processing and
sourcing key components used in a wider range of goods such as
electric vehicle batteries.
    "These actions underscore the need to diversify supply
chains," a U.S. Department of Commerce spokesperson said in a
statement. "The United States will engage with our allies and
partners to address this and to build resilience in critical
supply chains."
    In a separate but related industry, China has about
one-third of the world's rare earth reserves, key to production
of EV batteries and electronics. It has at least 85% of the
world's capacity to process rare earths into material
manufacturers can use, a capability other countries want to
develop.
    "China produces most of these raw materials but I’d argue
blocking exports would also mean they will lose revenue and
force the rest of the world to find alternative sources," said
Stewart Randall, who tracks China's semiconductor sector at
Shanghai-based consultancy Intralink. 
    China has been the go-to for companies because it is able to
export processed minerals at a lower cost than other countries.
If prices rise as restrictions take hold, however, companies
would have another reason to shift supply chains. 
    Netherlands-based Nyrstar, majority owned by trading and
logistics company Trafigura, said it was looking at germanium
and gallium projects in Australia, Europe and the United States
to help ease shortages created by China's curbs. 
    Sweden's Ericsson  ERICb.ST  said it always aims to have a
diversified supplier base and "as a next step we will make an
in-depth analysis of the effect of these measures, and the
implications on Ericsson." 
    China's announcement came just ahead of a visit to Beijing
by U.S. Treasury Secretary Janet Yellen. The metal curbs are
likely to further strain U.S.-China relations as the countries
vie for dominance in key sectors of semiconductors and defense
technology. 
    In Taiwan, a senior government official said China's
restrictions on exports of gallium and germanium marked "a new
wave of retaliation" in a "tit-for-tat approach." 
    "Export controls accelerate, or are an accelerator, for
countries including Taiwan, South Korea and Japan to reduce our
dependence on China's supply of those critical materials," said
Taiwan deputy foreign minister Roy Lee. 
    Japan, which starts restrictions on chipmaking tool exports
to China from July 23, said it was still examining the impact of
Beijing's controls. South Korea said the short-term impact would
be limited. Both countries are leading chipmakers.
    Some industry watchers believed China's metals restrictions
could trigger short-term supply snags and higher prices. Others
said China would feel more pain from Washington's restrictions.
    "The effect of restriction would yes be an increase in
price, but not at all as painful for the rest of the world as
chip restrictions are for China," said John Strand, from
Copenhagen-based Strand Consult.
    But Navitas Semiconductor Corp  NVTS.O , which makes chips
that use a substance called gallium nitride, on Wednesday said
it expects no adverse effects to its business from China's
export controls.
        "Significant sources of gallium are available worldwide,
as it is a natural by-product in the production of other metals
such as aluminum," the company said in a statement.
  

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EXPLAINER-China's rare earths dominance in focus after mineral
export curbs     urn:newsml:reuters.com:*:nL1N38R03S
FACTBOX-Where are germanium and gallium produced, what are they
used for?      urn:newsml:reuters.com:*:nL1N38Q0Q2
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Supantha Mukherjee in Stockholm, Hakan Ersen in
Berlin, Ben Blanchard in Taipei, Brenda Goh in Shanghai and
Kanishka Singh in Washington; Writing by Anne Marie Roantree,
editing by David Gaffen and David Gregorio)
 ((annemarie.roantree@thomsonreuters.com; +852 97387151; Reuters
Messaging: annemarie.roantree.thomsonreuters.com@reuters.net))