China's control over key minerals tests Western economies

The ongoing trade conflict between the US and China has intensified particularly in the realm of critical minerals essential for technology and defence industries.

As the US and China vie for dominance in semiconductor chips and green technologies, they have engaged in a growing cycle of trade disputes marked by retaliatory measures, Caliber.Az reports, citing foreign media. 

Both nations have implemented a range of export controls, tariffs, and blacklisting against each other and their allies. The latest move from Beijing, effective September 15, introduces export controls on antimony, a rare metal used in military and optical technologies. This follows China's previous restrictions on germanium and gallium, essential for chips and military communications. With China producing about 60 per cent of rare earth elements and processing nearly 90 per cent, its control over these materials becomes a strategic leverage against Washington.

In response, the US has restricted exports of advanced semiconductor technologies to China and worked to limit Chinese companies' market access. This tit-for-tat approach has disrupted both economies, impeded global growth, and stalled innovation. The trade conflict shows no signs of abating, prompting a need for adaptation to fragmented supply chains. For instance, Huawei is collaborating with the domestic chipmaker SMIC to advance chip development, and Chinese buyers are exploring ways to bypass US restrictions on high-tech processors. 

The US and its allies have launched initiatives like the Mineral Security Partnership to enhance collaboration on critical resources. However, these forums must swiftly transition from discussions to actionable strategies. There is growing concern among businesses that Beijing might impose additional restrictions on critical metals, potentially disrupting chip production due to rising prices and inadequate supplies. Increasing mining and refining efforts is essential. Although China dominates these sectors, significant reserves of critical metals remain available outside its borders, including in the West. 

For instance, Nyrstar, part of Trafigura, estimates that a zinc smelter in Tennessee could fulfill 80 per cent of the US annual demand for gallium and germanium. The rising commodity prices driven by Beijing’s controls may also make extraction more economically viable. To support the industry, Western governments need to streamline operations. Price volatility poses risks to extraction, and competition with below-cost exports from China is challenging. 

Simplifying planning regulations and chemical standards, and adopting uniform environmental policies would be beneficial. Coordinated financial incentives, such as price insurance and public-private partnerships, could mitigate risks for rare metal projects, while long-term agreements can ensure demand stability. Research into alternative materials and recycling methods is also crucial. For instance, gallium can be recovered from coal fly ash, and silicon may replace germanium in some electronics. Western nations have long relied on cheap raw materials from China, while Beijing invested heavily in the mining and refining sectors. 

The current economic tensions between the US and China highlight the drawbacks of over-reliance on a single supplier for essential metals. Although China's dominance in this sector seems formidable, a unified and strategic approach to critical minerals could help reduce its leverage in the ongoing trade conflict.