The restrictions on the export of raw materials from China alert the EU: "We will not repeat the mistakes of the pandemic and Russian gas"

  circular economy | July 14, 2023

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eunews

The President of the EU Commission, Ursula von der Leyen, has announced that a process is underway to address a possible semiconductor crisis, when Beijing will limit gallium and germanium in August: "We must clarify the dependent sectors and alternative suppliers"

The European Union does not want to find itself in a new supply crisis, even if the risk is very real. After critical medical material at the outbreak of the Covid-19 pandemic and Russian gas after the start of the war in Ukraine, China's restrictions on the export of critical raw materials have alarmed the Twenty-Seven. It is for this reason that the EU Commission is already analyzing the situation to take immediate countermeasures: "We will not repeat the mistakes of the pandemic and Russian gas, we have accumulated experience and learned how important it is to have many partners who share our vision", he said. warned the number one of the community executive, Ursula von der Leyen.

Answering questions at the end of yesterday's (13 July) EU-Japan summit on close coordination with Tokyo on the supply chain of critical raw materials needed for semiconductors – and consequently for the microchips underpinning dual transition technologies digital and green – President von der Leyen showed particular concern about Beijing's announcement of limitations on the exports of two rare metals, gallium and germanium: “China has been clear that export control measures are linked to the semiconductor issue, from what I understand they will make the decision on implementation in August.” The announcement from the Chinese Ministry of Commerce came at the beginning of July and foresees that starting from August 1st the export of the two by-products of the processing of raw materials such as coal and bauxite will be almost blocked. This is a measure for the protection of the national strategic interest within the framework of a trade war with the United States which for years has seen mutual limitations of key technologies, with indirect consequences also for the European Union.

“In a situation like this we must clarify which specific sectors are dependent on them, which supply chains are involved and above all who else can supply us with these materials”, explained the president of the EU Commission, outlining the process that has been set in motion in Brussels “to prevent a very difficult situation”. The way out for Brussels lies precisely in the diversification of the supply chain of gallium, germanium and all the other critical raw materials on which the Union largely depends on Beijing. “It is the objective of the Critical Raw Materials Club that we are forming”, i.e. the set of international partners (consumers and producers) envisaged by the Critical Raw Materials Act of last March 16: “We will have a quick response against this type of coercive measures and a better overview of who can help us with supplies,” emphasized von der Leyen. More direct was the President of the EU Council, Charles Michel, who on the same issue wanted to forcefully reiterate that "these restrictions are proof that we were right in saying that we need to diversify the supply chain" of critical raw materials. The impact for the Twenty-Seven will depend on the application of the restrictions, because exports have not been suppressed but subjected to greater controls: exporters will have to request a specific license for gallium and germanium from the Chinese Ministry of Commerce, with information on buyers and orders placed .

What are critical raw materials and dependencies on China

Critical raw materials are materials – neither food nor energy – of strategic economic importance, characterized at the same time by a high supply risk due to political, commercial and environmental issues. Critical raw materials are found everywhere, from smartphones to electric cars, from pharmaceutical products to heat pumps and, as the Commissioner for the Internal Market, Thierry Breton, recalled on the occasion of the presentation of the Critical Raw Materials Act, "there cannot be batteries without lithium, there can be no wind without rare earths and no ammunition without tungsten". If the critical raw materials identified by the Commission are 34 (from bauxite to helium, from arsenic to strontium), the document attached to the proposed Regulation highlights 16 strategic ones in particular, Gallium and Germanium are in this short list.

In general, Critical Raw Materials are essential components for the production of semiconductors, materials capable of allowing or blocking the passage of electricity, which are the basis of microchips, small devices that can store large quantities of information. Microchips in turn allow the operation of computers, smartphones, photovoltaic panels, wind turbines, cars and any device with at least one electronic component. It is for this reason that without raw materials it is not possible to achieve the digital and even green transition that the European Union has in its sights, without having to underline that to create green hydrogen electrolysers must be created which in turn require Critical Raw Materials . Specific to the Chinese restrictions, gallium is used in compound semiconductors that combine multiple elements to improve transmission speed and efficiency (TV screens, smartphones, solar panels, radar), while germanium for fiber optic communications, for night vision goggles and space exploration equipment (such as solar cells that power satellites).

In 2022, China exported 94 tons of gallium and 43.7 tons of germanium, covering approximately 80 and 60 percent of global production respectively. According to the study published by the EU Commission services, the Twenty-Seven import 71 percent of the gallium and 45 percent of the germanium needed for industrial production from China. This dependence derives from the fact that Beijing has managed over time to keep its critical raw materials at a controlled price, despite the fact that the extraction process of some of them is quite expensive: for example gallium and germanium are not found in nature, but are the by-product of other processes, such as coal, bauxite, zinc and aluminium.