The FT Article: The battle to secure economically critical metals
As the U.S. and China intensify their competition over semiconductor chips and green technologies, the global trade landscape is being reshaped by retaliatory export controls, tariffs, and blacklists. Central to this escalating conflict is China’s dominance over critical metals—resources essential to defense, technology, and manufacturing industries. With the recent introduction of export controls on antimony, a crucial component in military applications, Beijing is once again flexing its control over essential materials, heightening tensions in this already disruptive trade war.
Beijing’s Leverage: Rare Earths and Critical Metals
China's dominance in rare earth elements is undeniable. Producing 60% of the world’s supply and processing nearly 90% of these elements, Beijing’s control over critical metals is a potent weapon in the U.S.-China trade conflict. Antimony, used in armor-piercing ammunition and night-vision goggles, joins other restricted materials like gallium and germanium, which are vital for semiconductor chips and military communications. These restrictions are part of China’s larger strategy to leverage its monopoly over critical resources to counter U.S. technological sanctions.
U.S. Retaliation: Semiconductor Sanctions
On the other side, the United States is leveraging its semiconductor industry, blocking exports of advanced chips and restricting Chinese access to cutting-edge semiconductor manufacturing technology. American policies aim to cripple China’s ambitions in areas like artificial intelligence, 5G, and quantum computing by curbing its access to advanced semiconductors. Yet, despite these measures, China has shown resilience. Companies like Huawei, working with domestic chipmakers such as SMIC, are developing next-generation chips, while Chinese buyers find alternative routes to procure restricted components.
The Global Fallout: Fragmenting Supply Chains
The tit-for-tat trade measures have far-reaching consequences. Both the U.S. and Chinese economies are suffering from the disruptions, with ripples extending into the global supply chain. Higher prices and restricted access to critical materials threaten industries from consumer electronics to electric vehicles, dragging down global growth and innovation. As supply chains fragment, industries face the daunting task of adapting to a more unpredictable trade environment. The tech war, while primarily focused on the U.S. and China, has a profound impact on global commerce.
Strategic Response: Collaboration, Mining, and R&D
To counter China’s stranglehold on critical materials, the U.S. and its allies have established initiatives such as the Mineral Security Partnership (MSP). However, for these efforts to have real impact, they must transition from discussions to actionable policies. Western economies must accelerate mining, refining, and recycling capabilities, particularly for metals like gallium and germanium, which are crucial for semiconductor production. Companies like Nyrstar, operating a Tennessee zinc smelter, demonstrate the potential for domestic sourcing, projecting that the facility could meet 80% of U.S. gallium and germanium demand.
Policy Changes: Addressing Price Volatility and Regulation
For these efforts to succeed, however, western governments must facilitate the extraction and processing of critical metals by streamlining regulatory frameworks. Extraction remains fraught with risk due to price volatility and competition from China’s below-cost exports. Simplifying planning laws, harmonizing environmental standards, and offering financial incentives will be key to unlocking domestic mining potential. Initiatives like price insurance, public-private partnerships, and long-term offtake agreements could help mitigate the risks associated with these high-stakes industries.
Innovative Solutions: Recycling and Substitution
In the longer term, investment in strategic R&D can ease dependence on specific critical metals. For instance, gallium can be extracted from coal fly ash, a waste product, and silicon can be used as a lower-cost substitute for germanium in certain electronics. Such innovations could prove vital as the U.S. and its allies look to reduce China’s leverage in the tech war.
A Global Wake-Up Call
For decades, the West’s dependence on cheap Chinese raw materials allowed Beijing to amass unparalleled control over critical metal supply chains. The current U.S.-China trade conflict reveals just how short-sighted that reliance has been. China’s dominance in critical metals is formidable, but it is not unbreakable. A coordinated effort from the U.S. and its allies to invest in mining, refining, and innovative technologies can dilute China’s leverage. The time for action is now if America wants to remain competitive in this new era of economic and technological warfare.
Conclusion
The U.S. and its allies are at a crossroads. Will they take the necessary steps to diversify supply chains and reduce their reliance on China, or will Beijing’s dominance in critical metals continue to dictate the terms of global trade? As the tech war escalates, adapting to these realities will define the future of industries across the globe.
What more can governments do to protect critical supply chains? Is increased collaboration between private enterprises and public institutions the key to breaking free from China’s stranglehold on critical metals?
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