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EU Asks Local Firms For Critical Chip Metals After China Imposes Restrictions

The European Union is asking European aluminum and zinc manufacturers whether they can produce key chip metals gallium and germanium as byproducts in their smelters as it seeks alternatives after China imposed export restrictions.  

Last week, China sent shockwaves through the supply chain and chip markets after announcing export controls on two metals, gallium and germanium, starting on August 1. These critical metals are used in microchip production. Former vice-minister of commerce Wei Jianguo told China Daily that the export restriction on gallium and germanium was “just the beginning” in an escalating technology war with the United States.

China accounted for a massive 98% of the world’s gallium production in 2022 and controlled 68% of global germanium refinery production, according to the US Geological Survey (USGS). The metals, which are not found naturally, are by-products of the refineries of other metals. Gallium is a by-product of processing bauxite and zinc ores, while germanium is a by-product of zinc production.

China’s restrictions caught Europe in the middle of the tech war, and the EU is now urgently asking local producers if they can manufacture gallium and germanium, the Financial Times reported on Friday.

However, the energy crisis last year and the industrial slump has led to aluminum and zinc smelters curtailing or halting operations, which would make it difficult for Europe to produce gallium and germanium locally.

The EU has approached Greek aluminum producer Mytilineos Energy & Metals to ask it to consider producing gallium as a byproduct at its bauxite refinery, the FT reports.

“When you can’t competitively produce your main commodity because the conditions are so absurdly problematic, it might be idiotic to invest in a side-product that is gallium,” Nick Keramidas, executive director of EU affairs at the Greek company, told FT.

Earlier this week, the European Parliament adopted legislation to boost the EU chips industry, but this would be a longer-term solution to the current problem.

Europe needs to support and recognize the vital role of aluminum in many critical industrial sectors, the association European Aluminium said, commenting on China’s export restrictions.

“With the appropriate framework conditions and strategic investments, there is potential for European alumina refineries to resume gallium production and reduce our reliance on Chinese imports of this increasingly vital metal,” European Aluminium said on Thursday.

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By Tsvetana Paraskova for Oilprice.com

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