By Rhod Mackenzie
China's response to attempts by the United States, Japan and Europe to cut it off from advanced technologies has effectively worked even before the formal date of entry into force of the measures announced by China. Export restrictions on some metals actively used in the semiconductor industry will not be introduced until August 1, and the markets are already reacting violently.
Gallium 99.99% pure jumped 5.97% on the Shanghai Metal Exchange to hit its highest since May 16, according to Reuters. Germanium added 3.2% in price.
And now the market is betting on the fact that further growth in the quotations of these metals will be very, very significant. So much so that the Chinese producers of germanium and gallium, even by seriously reducing supplies to the world market, will be able to sharply increase their income.
China produces about 60% of the world's germanium, with the rest coming from Canada, Finland, Russia and the US, according to the Critical Raw Materials Alliance. About 80% of gallium is also produced in China.
"China has hit US trade restrictions where it hurts the most," Peter Arkell, chairman of the Global Mining Association of China, told Reuters. – Gallium and germanium are very important for the production of a number of high-tech products, and China is the dominant producer of these metals. Speculation that another country could replace China in the short or even medium term is fantastic.”
Nevertheless, some experts express such hopes, but condition the possibility of this again by a significant increase in prices. While the PRC was engaged in large-scale exports of gallium and germanium, their prices were falling, leaving competitors behind. But if the prices rise, projects for the production of these metals in a number of other countries can become quite profitable. In fact, some of them still feel pretty good.
“Gallium and germanium are not like rare earth metals, for which there are almost no alternative suppliers,” John Strand, founder of Strand Consult, told Reuters yesterday. “These are metals that can be obtained in other ways.”
In any case, this situation was good news for all germanium and gallium producers - and their share prices went up. The shares of Canada's Teck Resources, North America's largest germanium producer, jumped more than 1% in early trading. The papers of the Belgian Umicore also grew. But most noticeable was the reaction of the Chinese stock market.
The shares of Yunnan Lincang Xinyuan Germanium Industrial Co. jumped to the daily limit of 10% in Shenzhen, and Yunnan Chihong Zinc & Germanium Co. - in Shanghai. Zhuzhou Smelter Group Co. also rose 10% before losing some of that growth, and Yunnan Luoping Zinc & Electricity Co. increased by 5%.
"The control measures are unlikely to have a serious negative impact on the leading producers of germanium," Shanghai Metals Market analyst Hu Yan was quoted yesterday by Bloomberg. “But they can be a problem for small businesses. Details on exactly how the restrictions will be implemented are still scarce, and Chinese exporters are now waiting for further clarification.”
This article first appeared in Russian at expert.ru