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China's dominance of the gallium market is near total – but there's opportunity for Western disruptors
RFC Ambrian report shows scale of China's control over gallium production
Metal is key to Western semiconductor industry, defence, AI and tech
China still driving the car, but Western companies are seeking to break its hold
How can the West break China's hold on the gallium market?
A new report from Perth-based corporate advisory firm RFC Ambrian on the commodity, critical for its use in semiconductor wafers, has shone a light on the challenges ahead for Western consumers hoping to break their reliance on the Chinese supply chain.
While the market, globally, is in a state of oversupply, this is almost entirely contained within the Chinese market.
Prices peaked at US$580/kg in June 2022 before tumbling as Chinese refiners pumped out material and local LED and rare earth magnet markets were crunched by Covid lockdowns.
Gallium consumption has accelerated from just 4t in 2005 to 335t in 2024, according to RFC.
But in the same time, China's output of low purity gallium has risen from 22t to 750tpa, thanks to demands from its government that aluminium smelters produce the high-tech material as a by-product.
Now China holds around 98.4% of the market despite being a major importer of bauxite, the material from which most gallium is extracted, reliant on ores from Guinea, Indonesia and Australia.
Russia produces a further 0.8% of primary gallium, while South Korea and Japan, the two Western-aligned countries in the list, share output of just 0.8% between them as a by-product of zinc refining.
And while China produces ~98% of the world's gallium it consumes just 62%, giving it great leverage.
That's why export restrictions in 2023 and a subsequent ban in December 2024 on shipping product to the US – which puts around 83% of its gallium consumption into semi-conductor wafers needed for applications like lasers, security sensors and AI data centres – sent prices surging to US$455/kg by November 2024.
It's currently trading above US$400/kg, with Western consumers almost entirely dependent on Chinese suppliers of low purity gallium. And the market is forecast to remain tight while this situation remains, though Chinese companies could be sitting on large (but unverified) stockpiles.
"With only limited new production in the West likely in the foreseeable future, China holds nearly all the cards in this commodity," RFC's analysts said.
"This is a significant problem for Western markets, and material availability has become more challenging following China's export restrictions announced in 2023."
Market growth
While opaque, RFC estimates around 55% of gallium-based semiconductor production actually occurs in the West, heightening concerns around its exposure to a market dominated by China, which could be leveraged if a tech trade war escalates.
As demand for gallium has increased in the West, weak economics has ironically prompted the idling of capacity from non-Chinese players in placed like the UK, Hungary, Germany and Kazakhstan.
While around 280t of scrap recycling capacity does exist, mostly in China but also in places like Canada, the US, Japan and Slovakia, primary supply has been harder to establish.
So far two serious contenders to supply gallium in the near term have emerged.
One, a 50tpa plant proposed in Greece by Metlen Energy and Metals to complement its alumina operations in Agios Nikolaos, could supply 7% of the global market.
Another is a 3.5tpa demonstration plant planned by Rio Tinto (ASX:RIO) at its aluminium ops in Quebec, Canada, which could be parlayed into a 40tpa commercial-scale facility should those studies prove successful.
On top of that Trafigura-owned zinc refiner Nyrstar is studying a potential tailings operation that would produce both gallium and another critical metal, germanium, from waste at its Clarksville mine in the US, with a similar project also being studied at Lubumbashi in the DRC.
"There may be other opportunities to establish new gallium capacity in the West at new or existing alumina refineries or zinc smelters; however, the technological and economic practicalities remain uncertain, especially considering that the amounts of gallium recovered are minimal and hold limited economic significance for alumina and zinc producers," RFC's report authors said.
"Any construction of new capacity would need to be economically justified. Metlen's proposed new gallium plant in Greece and Rio Tinto's planned demonstration plant in Canada are both positive indicators that producing gallium in the West could once again be viable."
But there could be significant benefits for any emerging players who can crack the code, with gallium production and consumption having risen sharply over the past two decades.
Junior contenders
Outside of those major players, a host of junior contenders have been identified by RFC in its roundup of the industry.
MTM Critical Metals (ASX:MTM), where shareholders approved a name change to Metallium Ltd at a meeting on June 30, has demonstrated early success using a novel metal processing technology called Flash Joule Heating to improve gallium and germanium recover from scrap.
RFC says the processing of gallium-bearing post-consumer scrap (used or old scrap) is not currently feasible due to the dissipative (small or scattered) nature of the metal in consumer products.
But MTM has shown its ability to generated 90% gallium and 80% germanium recovery rates from semi-conductor industry waste. It has access to high-grade material grading up to 20% indium, 15% gallium and 18% germanium from US metals recovery experts Indium Corporation.
Also looking to produce gold from e-waste, green cement from red mud (alumina waste) and potentially other critical metals like lithium, antimony and rare earths, a recent $50m raising recently placed MTM on track to become a commercial critical metals producer in the US domestic market within 12 months.
In WA, RareX (ASX:REE) has identified high-grade gallium in historic drilling at its Cummins Range project in the state's Kimberley region, a deposit which already hosts a large resource of rare earths and phosphate.
RFC noted those results were followed in May by a strategic collaboration agreement with Gega Elements, an Aussie company looking to develop a new gallium extraction technology.
"This partnership with Gega Elements begins to position RareX as one of a select few large-scale potential gallium developments outside China. Gallium is critical for semiconductors, 5G, and defence – yet almost entirely controlled by a single jurisdiction," REE MD James Durrant said at the time.
"Through this collaboration, we're working to change that, leveraging RareX's resource scale and Gega's science-driven approach to build a truly sovereign supply solution.'
Nimy Resources (ASX:NIM) also cops a mention. Its Mons project includes the Block 3 discovery, a 3km by 1.5km wide target where chlorotised schist believed to hold gallium grades far exceeding those found in bauxite deposits has been identified by the junior.
Nimy recently wrapped up resource drilling at Mons, having previously stated an exploration target of 9.6-14.3Mt at 39-78ppm gallium.
Grades are estimated to be far higher in the schist portion of the exploration target (1-1.3Mt at 103-153ppm Ga), suggesting the project could be amenable to selective mining or ore sorting techniques.
