West Faces Soaring Prices, Supply Gaps for Critical Metals Three Years After Chinese Curbs

Three years after Beijing imposed export controls on gallium and germanium, Western nations are grappling with soaring prices and a persistent supply shortfall for the two metals, which are critical for the semiconductor, defense, and clean energy sectors. The restrictions have acted as a major supply shock, forcing companies to diversify supply chains and spurring government-backed efforts to develop production outside of China.

A Persistent Supply Shock

Since China introduced the curbs in 2023, prices for gallium and germanium have surged to 9 to 10 times their previous levels, according to a Reuters report. The move has underscored the West's deep dependency on China, which consultancy Project Blue estimates will still account for 98.9% of global primary gallium supply and 68.6% of germanium supply in 2025.

"These export controls have acted as a real wake-up call," Cristina Belda, a senior analyst at Argus, told Reuters. The impact has been particularly acute for manufacturers of infrared optics used in defense and thermal imaging systems, who have struggled with tight supply. In response, companies have been stockpiling materials, exploring substitutes, and seeking out non-Chinese suppliers.

The Race for New Supply

Western governments and companies are now mobilizing to build alternative supply chains, though these projects are in their early stages. Key initiatives include:

• Projects by METLEN in Greece, Alcoa and Sojitz in Australia, and Rio Tinto in Canada.
• A pledge by Australia and the U.S. of over $3.5 billion to support critical minerals projects, including gallium and germanium.
• Efforts by established producers like Canada's Teck Resources to expand output.

However, substituting the metals is a significant challenge. "There is no one-to-one substitute for germanium," said Jessica DeGroote Nelson, a senior vice president at U.S.-based Edmund Optics, noting that using other materials would require costly and time-consuming redesigns.

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Widening Demand-Supply Gap

The urgency to secure new supply is compounded by rising demand, fueled by the artificial intelligence boom, the expansion of fiber-optic networks, and growing military applications. S&P Global projects that gallium demand will rise by about 12% annually through 2030, while germanium demand is set to grow by 3.3% per year over the same period.

New Western production is unlikely to close the gap soon. S&P Global forecasts that by the end of 2026, non-Chinese gallium supply capacity will total just 20 metric tons, leaving a supply deficit of about 678 tons. For germanium, the shortfall is projected to be 177 tons.

Even by 2030, with eight new projects potentially online, ex-China gallium supply is forecast to reach 386 tons, forcing Western consumers to rely on China for 65% of their needs, according to Reuters calculations based on S&P data. New germanium refineries are expected to cover only about 48% of projected non-Chinese demand.

Market Outlook

Analysts believe that while a material reduction in dependency is possible, complete independence from China is unrealistic in the medium term. "We think a material reduction in dependence is achievable over five years, but eliminating dependence on China is much less realistic," Jack Bedder, founder of Project Blue, told Reuters.

New Western projects also face the challenge of competing with China's vast economies of scale and lower production costs. According to Piyush Goel, a consultant at CRU, government support such as price floors will likely be necessary to ensure the long-term commercial viability of these new facilities.