London, January 14th (Argus) - Before China banned the export of dual-use items last week, Japan was already working to diversify its gallium supply chain. Despite investments in Australia and Kazakhstan, the supply of gallium outside of China is not sufficient to meet Japan's demand in the short term. It is expected that the gallium industry in Japan will be disrupted.
This ban was announced by China on January 6th after the intensification of diplomatic tensions, but it did not specify which goods would be prohibited. However, in key minerals with dual uses, the supply of overseas gallium products is expected to be the most severely affected.
China is Japan's largest source of gallium, accounting for approximately 60% of its total imports.
Japan uses gallium in the defense and automotive sectors. Gallium-based chips can power semiconductors, electric vehicle batteries, and advanced driver assistance systems. As the shift towards gallium nitride power devices and 5G infrastructure occurs, the importance of this metal is increasing, so a gallium supply disruption could affect industries beyond defense in Japan.
This ban came at a time when there was a severe supply challenge for gallium outside of China. Due to concerns that this metal could be used in military technology, China implemented export controls in August 2023. These control measures have squeezed global gallium supply to a critical level and pushed prices up by 162% over the past two years.
On January 13th, Argus' assessment of European gallium prices was $1,500 - $1,700 per kilogram, higher than $1,300 - $1,450 per kilogram on January 6th. Market participants expect that once demand rebounds, prices will rise further.
A trader said, "This restriction will further tighten the market, and Japanese consumers will rush to obtain as much raw material as possible."
There have been no inquiries yet, but it is expected that there will be buyer inquiries in the coming weeks. "Market inventories are already running low, and there is little cargo available for supply," another source said.
According to sources, the reduction in China's export of gallium to Japan could lead to domestic oversupply, but China can redirect the raw materials to other markets. Whether these raw materials will reach Europe remains to be seen. China's export of gallium to Europe has been limited, but it has increased since last November.
Investments in Australia and Kazakhstan
Japan has been seeking to obtain the metal through various means, including improving recycling, establishing new partnerships, and directly investing in foreign mining projects. The state-owned energy agency Jogmec said, "Acquiring upstream equity is crucial to ensuring the stable supply of mineral resources."
The agency established the Jaga joint venture with the trader Sojitz, which produces gallium as a by-product at Alcoa's alumina refinery in Western Australia.
Alcoa and Jogmec are conducting feasibility studies and plan to start gallium production in 2026, with Sojitz as the acquiring party.
Recently, Japanese trading company Mitsubishi (Mitsubishi) signed a long-term gallium trading agreement with the Luxembourg-based Eurasian Resources Group (Eurasian Resources Group). The production from Kazakhstan is expected to start in the third quarter, reaching up to 15 tons per year. This is equivalent to 10% of Japan's annual gallium consumption.
Japan has also invested in infrastructure in Kazakhstan to ensure the critical mineral supply chain through long-term purchase agreements and refinery development.
Projects outside China are developing over 230 tons of potential gallium capacity.
This includes the aluminum factory being built by Greek Metlen Company and the US-based Atalco. Metlen plans to produce 40-50 tons of gallium per year at its factory in Virginia by 2027-28. Meanwhile, Atalco received $450 million in funding this week, which will enable it to restore the aluminum production capacity of its Gramercy factory in Louisiana to the specified 1.2 million tons per year, and establish a new 50-ton-per-year gallium production plant.
Sources said that although the long-term outlook for global gallium supply seems more promising, these projects will not alleviate the current supply shortage.
