A recent series of export controls imposed on critical minerals and their associated technologies by China has highlighted the potential supply chain risks of protectionist policies, as well as the impediment fragmented critical mineral markets would be to the energy transition.
Antimony is the latest critical mineral to be targeted by China for export controls, along with related elements and gold-antimony smelting and separation technology.
China is the largest antimony producer in the world with 48 per cent of global production in 2023, giving it strategic control over a key raw material used in batteries, munitions, flame retardants, and photovoltaic equipment.
As critical minerals are upstream of nearly every sector that drives growth, innovation and national security, including clean energy, advanced computing, biotechnology, transportation, and defence, export controls could result in increasing price volatility and the reshaping of downstream supply chains.
Furthermore, extraction of these minerals is often concentrated in single countries, such as lithium in Australia, cobalt in the Democratic Republic of Congo, nickel in Indonesia, and rare earth elements in China, while China also processes and refines between 60 and 90 per cent of most critical minerals.
A trade policy paper by the OECD’s research arm showed that export restrictions on critical raw materials had seen a five-fold increase since the OECD began collecting data in 2009, with 10 per cent of global exports in critical raw materials now facing at least one export restriction measure.
The OECD said: “Export restrictions on ores and minerals – in essence the raw materials located upstream in critical raw material supply chains — grew faster than restrictions in the other segments of the critical raw materials supply chain, correlating with the increasing levels of production, import and export, as well as the concentration in a small number of countries.
“China, India, Argentina, Russia, Vietnam and Kazakhstan issued the newest export restrictions over the 2009 to 2020 period for critical raw materials, and also account for the highest shares of import dependencies of OECD countries.
“The OECD finds that the trend toward increasing export restrictions may be playing a role in key international markets, with potentially sizable effects on both availability and prices of these materials.”
China’s recent controls began in July 2023, when it imposed export restrictions on eight gallium and six germanium products, with both minerals integral to the manufacture of semiconductors and germanium for solar cells, fibre optic cables and infrared technology.
While total August exports of gallium and germanium products from China halted, they resumed the next month after major Chinese producers were granted the relevant export permits.
Related elements also controlled include gallium oxide, zone-refined germanium ingots, and gallium nitride, a high-performing semiconductor material that conducts electrons more efficiently than silicon by a thousand-fold or more.
Han Xiaomin, General Manager of Chinese semiconductor market research firm JW Insights, explained the restricted items were important materials for semiconductors and were closely related to military industry applications.
Han added: “The move may be a countermeasure against the US-led chip export controls on China.”
A few months later in October, China imposed export controls on graphite, requiring a permit to export ‘high-purity synthetic graphite and natural flake graphite, including spherical and expanded forms’, a decision China said was made to protect national security.
Along with being the top graphite producer and exporter globally, China has more than 90 per cent of the world’s graphite refining capacity for producing the battery-grade material used in nearly all electrical vehicle battery nodes.
Before the end of last year, rare earth element magnet manufacturing technologies were added to the list, joining an existing ban on related technology used to extract and separate rare earths.
These recent measures have the potential to disrupt global supply chains, hamstring critical industries, and encumber electrification and decarbonisation efforts, according to FTI Consulting, but their severity depended on how they were implemented.
FTI said: “China has the ability to expand restrictions beyond those in place or announced currently, most notably in the domain of rare earth materials. “While we believe this is unlikely, it nevertheless poses a major threat and the ramifications of such a development would be severe.”
FTI suggested the most likely outcome over the near term was a reconstructed supply chain that relied on friendly and stable trade partners outside of China, such as Canada and Australia.
This would mean China could be at least partially displaced and be adversely affected by its own export controls, similar to China’s recently-lifted ban on Australia coal imports which led to unintended consequences.
FTI added: “With its recent actions, China has demonstrated its importance in the realm of critical and rare earth materials and underlined the need for countries and corporations alike to shore up and diversify their supply chains, to the extent possible, to mitigate this inherent threat.”
Economists from the International Monetary Fund have suggested that a scramble by competing powers to secure strategic minerals could lead to a fragmentation of crucial mineral markets, adding to price pressures and increasing the costs of the climate transition.
They said: “A slide toward opposing trading blocs could substantially delay the energy transition.
“This trifecta of high concentration of production and low reactivity of supply and demand makes critical minerals for the energy transition highly vulnerable in the event of trade restrictions.”
IMF modelling showed that fragmented critical mineral markets would cause an oversupply of most minerals for the US-Europe-plus bloc, though the bloc’s use of minerals would be constrained by how long it takes to scale up refining capacity.
For the China-Russia-plus bloc, the inability to import copper, nickel, lithium, and cobalt from countries such as Chile, the Democratic Republic of Congo, and Indonesia would lead to an additional price increase of 300 per cent on average.
Overall, the study found that global net investment in renewable technology and production of electric vehicles would be about 30 per cent lower in a fragmented market scenario.
Research published in February by China political economy- focused thinktank Trivium noted that although China had instituted these levers of control, there was no evidence yet that it was blocking any actual mineral exports to strategic competitors.
Trivium said: “For now, Beijing aims to use its ability to block exports if it so chooses as a deterrent against further Western antagonism.
“Notably, gallium, germanium and graphite exports have fallen, but because foreign consumers have changed procurement patterns due to the suddenly high risk of disruptions.
“As far as we’ve seen, Beijing is still approving the export applications it receives.”
However, Trivium pointed out that these threats from China should be viewed as credible, as it had cut off mineral exports as a punitive tool in the past – the export of rare earths to Japan were halted for two months in 2010 after a diplomatic incident.
Those restrictions directly targeted high-value Japanese industries such as wind turbines, hybrid vehicles and military weapons, and were dropped once a political resolution was reached.
Trivium analysed 73 minerals that appear on at least one of the official US, EU, Japanese or Chinese critical mineral lists, and ranked the likelihood that controls might be imposed using a framework based on five criteria.
These are: criticality to strategic competitors’ domestic interests, strategic and symbolic reciprocity, Chinese advantage, non-dependence, and minimal domestic disruption.
Nine minerals were identified as most likely to be restricted by China, starting with tungsten, rare earths, and vanadium, followed by magnesium, copper, indium, titanium, antimony and bismuth.
