As conflicts with the United States and the European Union become increasingly frequent, the Chinese Communist Party (CCP) has imposed export restrictions or bans on various strategic minerals since last year. While these restrictions have had a short-term impact on the supply of Western companies, they have also prompted them to actively adjust their supply chains and reduce their reliance on China, accelerating the process of diversification. Overall, Beijing’s weaponization of critical minerals has brought about three main dilemmas for itself.
Firstly, it has created a crisis for domestic Chinese enterprises, especially small businesses. Secondly, it has turned the foreign competitors of Chinese enterprises into the biggest winners. Thirdly, it has expedited the “de-risking” of developed economies from dependence on China.
Starting from last July, the CCP announced export restrictions on indium and germanium and their compounds; in October last year, it announced export restrictions on graphite; in August this year, it announced export restrictions on metals including antimony. Following the escalation of the U.S.-China chip war, the CCP announced earlier this month a complete ban on the export of indium, germanium, and antimony to the United States.
Antimony alloys are commonly used in the manufacturing of bullets and large weapons. China is the world’s largest producer of antimony and dominates the production of many strategic materials. Indium and germanium are used in the production of semiconductors, solar panels, and weapons. Graphite is a key component in electric vehicle batteries.
These restrictive measures initiated by the CCP since last year have threatened the survival of domestic enterprises in China. Traders and analysts told Reuters that within China, these restrictions have already forced some weaker businesses to exit the market.
Two Chinese germanium traders told Reuters that they have stopped exporting because they are unable to obtain export permits, either because overseas customers are unwilling to provide specific details of the end-users or because these customers are from the United States.
Data from Chinese customs shows that as of October this year, no germanium or indium has been shipped from China to the United States. During the same period in 2023, the United States was the fourth and fifth largest export market for these two minerals from China.
For end-users, the CCP’s restrictive measures highlight the importance of supply diversification.
Maxime Picat, Chief Procurement Officer of Stellantis, an automotive manufacturer, said, “When you ‘de-risk,’ you need to use different levers to ‘de-risk.’ If you are a single solution company and know that all your battery suppliers are from China or South Korea, then you face a risk.”
The export restrictions imposed by the CCP on Chinese enterprises have provided an excellent opportunity for expansion to foreign competitors. Mining company Perpetua Resources is developing an antimony mine in Idaho with support from the U.S. government.
The company stated that the CCP is “weaponizing” the acquisition of minerals critical to the U.S. military and tech companies. Perpetua CEO Jon Cherry said, “We must take U.S. mineral resources seriously. It’s time to end our reliance on China and secure our future.”
According to data from market information provider Argus, the price of antimony has risen by nearly 230% this year in the busy spot market in Rotterdam, the Netherlands, reaching around $39,000 per metric ton.
Meanwhile, some Western mining and processing companies have begun to expand their production capacity.
US Antimony Corporation (USAC), the only antimony metal processor in North America, plans to increase production at its Montana smelter. Following the CCP’s announcement of export restrictions on antimony in August, the capacity utilization rate of the smelter reached 50%.
Chairman Gary Evans told Reuters, “We decided to increase production mainly because global prices of antimony in Rotterdam have more than doubled.”
He added that the CCP’s restrictive measures “greatly increased demand for our finished products” and emphasized that USAC does not depend on China. The company is negotiating to receive this material from one domestic U.S. supplier and four other international suppliers, with earliest deliveries expected in December.
Northern Graphite, based in Ottawa, claims to be the only natural flake graphite producer in North America. CEO Hugues Jacquemin told Reuters that after the CCP announced export restrictions on graphite in October 2023, the company saw a 50% increase in orders.
“After the export control came into effect in December last year, demand soared. We started to increase production capacity,” Jacquemin said. The company is developing projects in Namibia and Ontario to enrich its mine at Lac des Iles in Quebec.
Mark Jensen, CEO of ReElement Technologies under American Resources, specializing in rare earth recovery and processing, said that the recent export ban from Beijing has led at least 10 calls from U.S. mining companies seeking zinc ore, as zinc ore can serve as a source of germanium during processing.
He mentioned that these goods were previously shipped to China for processing due to lower labor costs and different environmental standards.
Jensen told Reuters, “We have been reaching out to these American suppliers of raw materials, asking them to sell these byproducts to us instead of shipping them to China, because we are now an alternative to China (companies).”
Canadian mining company Teck Resources is the only germanium metal supplier in North America, producing germanium as a byproduct at the Red Dog zinc mine in Alaska. The company told Reuters that due to the CCP’s block on exports to the United States, it is considering whether to increase production of this key material.
While the CCP’s export restrictions have impacted foreign enterprises relying on Chinese suppliers in the short term, they have also accelerated the search for alternative options by these companies and foreign governments to reduce dependence on China.
According to Reuters, German chemical and consumer goods giant Henkel wrote in a letter to customers on November 8 that it had suspended delivery of four adhesives and lubricants widely used by car manufacturers. Henkel attributed this to the CCP’s export restrictions on antimony.
Reuters sought comment from Henkel regarding the letter seen. The company stated that it is working to support its customers and find alternative suppliers: “We are closely monitoring the global antimony supply situation with the aim of restoring solutions to meet our customers’ orders.”
Henkel wrote in the letter, “Please note that we remain in close contact with our suppliers and are using all commercially reasonable means to address this situation through the utilization of our global supply chain, to provide support to our customers.”
The CCP often uses these critical minerals as weapons in retaliation against Western countries. The European Union proposed the concept of “de-risking” from China last year, and EU member states passed the “Critical Raw Materials Act” aimed at reducing reliance on Chinese products.
Germany, France, and Italy have agreed to further cooperate to ensure the supply of raw materials in the EU, especially by encouraging the restart of mining operations and the extraction of critical raw materials in Europe, including optimizing materials through the development of a circular economy.
The U.S. government has also been investing heavily in its domestic chip industry. The U.S. National Security Council stated in response to the recent round of CCP export controls, “These new control measures will only underscore the importance of enhancing cooperation with other countries to reduce risks and to move critical supply chains away from the People’s Republic of China.”
Following the CCP’s announcement of export restrictions on graphite in October last year, South Korean battery materials company Posco Future M responded at the time by advancing the commercial production timeline of its synthetic graphite plant.