China is to restrict the export of two “critical” metals. This is not going to be a problem. Actually, this is China shooting itself in the foot. Again.
Everyone in the metals business knows this. It's only China's politicians who do not understand this -- and it's China's politicians making the mistake.
The two metals under discussion are gallium and germanium -- used in making certain sorts of computer chips. Your mobile phone will contain gallium arsenide chips for example. Germanium's a bit more specialized, used in making fibre optic cables for example. The global market for each of them is only a few hundreds tonnes a year -- that sort of level.
So, if China's the world's major producer -- and it is -- then if they limit exports then why isn't that a problem? To answer that, let us take a step back into history. In 2010 China did much the same thing with rare earths. Decided to reduce exports and at the time they also produced 90% of the world's supply.
Lots of people were very worried about this. I wasn't. As I said in a piece back then, rare earths aren't rare, that's the thing to understand. So, if one supplier decides not to supply, all that's necessary is to dig another hole in the ground -- or perhaps create a mine -- and get them from that source instead.
Yes, obviously, it's a little more complex than that, but not by much. The reason China had that monopoly on rare earths is because it was willing to do the work cheaply. So, it decided to stop doing that. Ok, so yes, it'll be a bit more expensive, but it can and will be done elsewhere. In fact, two mines opened (Lynas and Molycorp) and between them they supplied more than the world outside China needed. So, by 2014 rare earth prices were below what they'd been in 2010.
This will all happen much faster this time around because we don't need to go mining for gallium and germanium. They're both byproduct metals. That is, we extract them from the wastes of doing something else. And we've lots of places where we do that something else. All we've got to do is add the correct little extra piece of equipment to do the collecting.
This is something that all too few people understand about many metals. There's lots of them around. But we don't, in fact, use very much. So, building a great big factory or mine doesn't really make sense. Instead, there's a bit here and there in wastes from other processes, and we get the little we need from them.
So we get our tellurium (for solar cells) from the wastes of copper production, our hafnium from making nuclear grade zirconium, and on through quite a long list. If we really needed much more of them then there are plenty such places we could get it from.
And so it is with gallium and germanium. The way we make aluminium is to take the ore, bauxite, and boil it up in caustic soda in a “Bayer Process” plant. As it happens there's gallium in the bauxite and we can extract it from this process. We don't usually bother because the world doesn't use much gallium -- but we could. And we will.
All that has to be done is add the right little collector to the side of the tank we're boiling in and there we have it, gallium! There are many such plants which do not, currently, have the right little collector. But they soon will.
Germanium is a little different in detail, but the basic point is the same. There's no shortage of it at all. In fact, the easiest place to get more of it is from fly ash. That's the waste from burning coal and the fly ash is what goes up the chimney. All modern plants collect this. So, we can get our raw material for free and by the hundreds of millions of tonnes. Soak this in acid and it's possible to take the germanium out. I or any one of hundreds of people could build you a little factory to do this for a handful of millions of dollars. Ok, millions of dollars is real money, but it's pretty trivial for the global semiconductor industry.
We could do this at Barapukuria and it would work, I guarantee that. Sure, the price might be a little different from China, but it's definitely possible to do it. Hey, if even I can do it then just think how many other people would find it easy?
China's government is making a mistake here. They think there's an actual shortage of these metals. When that's not true -- it's not really true of any metal. There's only ever a shortage of people currently extracting it. So, if people try to use their production as a political weapon then all that happens is that other people roll up their sleeves and start to produce.
It happened with rare earths and it'll happen again with gallium and germanium. There simply isn't a shortage of any metal we want to use. So, threatening a shortage turns out not to be a good weapon.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.