What are the impacts of export controls on gallium and germanium?, One price per day for materials | products | exports
"The prices of these two products have recently risen too 'terrifyingly', with almost all small metals rising together." When discussing the recent market trends of niche metals gallium and germanium, Luo Jun, a staff member of a rare metal material service provider, said.
On July 3rd, the Ministry of Commerce and the General Administration of Customs issued a notice on the implementation of export controls on gallium and germanium related items. Starting from August 1st, gallium metal, gallium oxide, gallium nitride and other gallium related items, as well as germanium metal, phosphorus germanium zinc, germanium dioxide and other germanium related items, cannot be exported without permission.
The prices of gallium and germanium in the market immediately rose upon hearing the news, almost one price per day, and the capital market also experienced fluctuations.
"The phone is almost bursting."
As important rare metals, gallium and germanium are widely used in fields such as semiconductor materials and new energy. Among them, gallium is known as the "new grain of semiconductor industry", and germanium is also one of the important semiconductor materials.
According to Luo Jun, his rare metal material service provider mainly deals with raw materials and simple primary processing. "Previously, we only focused on the domestic market, but recently many foreign trade suppliers have come to us to pick up goods and want to ship them before August 1st," said Luo Jun.
When asked if the factory has been working overtime recently, Luo Jun bluntly stated that even overtime is useless now because there is no stock to sell. "We have already placed long-term orders for shipment, and the factory only retains a level of safety stock. For domestic manufacturers, it's better to wait until after August 1st to see," said Luo Jun.
The person in charge of a gallium product supplier in Chengdu also mentioned that after the release of export control announcements, the prices of gallium and germanium have indeed increased significantly, and the current demand mainly comes from abroad.
Mr. Yin, who is engaged in the recycling of gallium and germanium waste, said in an interview with China News Service that in recent times, his friends who are engaged in foreign goods business have "almost had their phones knocked out", and many of them are coming to inquire about orders. "In recent days, domestic manufacturers of metal germanium ingots have been very busy, with many settlement orders and overseas customers wanting to produce their products as soon as possible."
According to data from Shanghai Nonferrous Network, on July 7th, the average price of 6N high-purity gallium was 2325 yuan/kg, an increase of 100 yuan/kg from the previous trading day; The average price of 7N high-purity gallium is 2575 yuan/kg, an increase of 100 yuan/kg from the previous trading day; The average price of germanium ingots is 9550 yuan/kg, an increase of 50 yuan/kg compared to the previous trading day.
According to the latest data from commodity market information supplier Baichuan Yingfu, overall, the price of Chinese metal gallium market has risen rapidly this week, from around 1750-1800 yuan/kg at the beginning of the week to the current level above 2000 yuan/kg, an increase of around 200-300 yuan/kg.
The market supply of germanium is also in short supply, with a significant increase in export orders and market quotations exceeding the 10000 yuan mark. Data shows that on July 7th, the ex factory price of 99.999% germanium metal, including tax, was 10000-10100 yuan/kg, an increase of 400 yuan/kg from the previous day. Looking at the extended term, in the past week, gallium and germanium related varieties have been almost priced at one price per day.
Can prices fall back in the later stage?
Wang Chao, a small metal analyst at Shanghai Ganglian Rare and Precious Metals Business Unit, told China News Service that after the release of the export control announcement, it is inevitable that foreign companies will contact Chinese suppliers to stock up as soon as possible or prepare application materials for purchasing gallium and germanium. This will increase the willingness of Chinese domestic enterprises to ship export orders, and there may be a large export of gallium and germanium metals in the short term. The price increase is also a way for suppliers to increase profits.
On July 3rd local time, American semiconductor wafer manufacturer AXT announced through its official website that its Chinese subsidiary will immediately apply for a license to continue exporting gallium and germanium substrate products from China, striving to minimize any potential interference to customers.
However, Wang Chao also mentioned that after the official implementation of export controls, the export control of the two metals will be stricter, and the export business of related gallium and germanium enterprises will be restricted, and the export volume will be reduced to varying degrees. Due to the impact of oversupply in China, prices of gallium and germanium may experience a pullback.
Taking germanium as an example, Wang Chao stated that although China's germanium production has remained relatively stable in recent years, germanium prices have continued to rise since the beginning of this year. Domestic terminal demand has been cautious in purchasing due to high prices, and many domestic enterprises rely on foreign orders to support them. After the implementation of export controls, it may lead to Chinese germanium production enterprises adjusting their sales plans. However, the price of germanium is too high, and there is no large demand domestically to absorb the reduced supply from foreign orders. If production costs maintain the current level, there is great resistance to the continued increase in germanium prices. At that time, manufacturers may adjust their prices according to the domestic supply and demand pattern.
Zhu Qing, Chief Researcher at the International Mining Research Center of the China Geological Survey of the Ministry of Natural Resources, told China News Service that in the short term, prices of gallium and germanium will definitely rise, but in the long run, there are many influencing factors, making it difficult to determine the trend.
According to Zhu Qing, since 2005, the price of domestically produced gallium in China has gone through three rounds of significant fluctuations and is now at a high level in nearly a decade. From 2017 to 2022, the price of germanium ingots remained below 8000 yuan/kg for a long time. Due to factors such as insufficient raw material supply and increased demand, it experienced two rounds of increase. Since the fourth quarter of last year, the activity of the germanium market has increased, and the price of germanium has risen. It is expected that the price increase will continue for a period of time.
The prices of these products will also be affected
China is a major producer of germanium and gallium.
According to USGS data, in 2022, China's primary gallium production was approximately 606 tons, with a consumption of approximately 500 tons, accounting for 90% of the global primary gallium production; In 2021, the global production of germanium metal was around 178 tons, while China's production of germanium metal was 125 tons, accounting for 70.22% of the world's total.
Among gallium compounds, gallium arsenide is an important second-generation semiconductor material and is currently one of the largest produced compound semiconductor materials. It is mainly used in LED, VECSEL, RF devices, and photovoltaic devices, with LED and RF devices accounting for the main part. Gallium nitride is expected to become one of the important materials for third-generation semiconductors due to its wide bandgap properties.
And metallic germanium is usually processed into zone melting germanium ingots, fiber grade germanium tetrachloride, infrared germanium single crystals, solar photovoltaic germanium substrates and other products, widely used in multiple high-tech and national defense security construction fields such as fiber optics, infrared, space photovoltaics, PET catalysts, etc.
In Wang Chao's view, the price increase of gallium and germanium products may affect the terminal industry products of the corresponding metal industry chain, such as the price changes in the infrared market, fiber optic market, germanium single crystals and chips for solar cells, semiconductor materials industry, optoelectronic devices, optical glass, etc.
In a recent research report, Guojin Securities also mentioned that China's implementation of export controls on gallium and germanium related items may lead to price reductions for GaAs substrate epitaxy and raw materials in the Chinese market, while for overseas markets, GaAs substrates and raw materials may experience price increases and supply shortages, increasing pressure on overseas substrate manufacturers.
The changing market situation of gallium and germanium will also bring more opportunities for the development of the industrial chain.
Wang Chao stated that in the long run, with the rise of application markets such as 5G, Internet of Things, and national defense informatization, gallium arsenide and gallium nitride semiconductor devices will experience explosive growth, which can also boost the gallium market.
Li Yiran, an analyst at Open Source Securities, believes that regulations may lead to a longer delivery cycle for new orders from international semiconductor companies, and it is expected that consumer electronics and upstream chips may experience a new round of price increases in the third quarter of 2023. Domestic semiconductor companies and communication equipment companies are expected to further extend their domestic substitution window, thereby strengthening their competitive advantage.
Intensive response from listed companies
In the A-share market, there are not many concept stocks of germanium gallium, mainly including Zhongjin Lingnan, Luoping Zinc Electric, Yunnan Germanium Industry, Guangzhi Technology, Hengguang Shares, Youyan New Materials, Hongda Shares, Chihong Zinc Germanium, China Aluminum, etc.
After the release of the export control announcement, related germanium gallium concept stocks rose for several consecutive days, with several individual stocks hitting the limit up. Among them, Yunnan Germanium Industry achieved three consecutive rebounds from July 4th to July 6th.
Yunnan Germanium Industry is a listed company in the germanium industry with a complete industrial chain. It is currently the largest producer and supplier of germanium series products in China.
On the evening of the 5th, Yunnan Germanium Industry announced that the main products of the company and its subsidiaries are material grade germanium ingots and germanium dioxide. Photovoltaic grade germanium products are mainly solar germanium chips. Infrared grade germanium products are mainly infrared grade germanium single crystals, germanium lenses, lenses, and infrared thermal imagers. Fiber grade germanium products are germanium tetrachloride for optical fibers, and compound semiconductor materials are mainly gallium arsenide chips and indium phosphide chips. According to the 2022 annual report, the export sales of Yunnan germanium industry accounted for 22.56%.
"When it comes to products related to the announcement category, the company and its subsidiaries must obtain licenses in accordance with national laws and regulations and the provisions of the announcement before exporting." Yunnan Germanium Industry stated.
After 5 days of trading, Guangzhi Technology also announced that its products such as germanium dioxide, germanium tetrachloride, and zone melting germanium are subject to export control measures. In 2022, the overseas sales revenue of the above-mentioned dual-use items of the company was approximately 82.73 million yuan, accounting for 8.84% of the company's operating revenue. "The company is currently unable to determine the impact of the above matters on the company," said Guangzhi Technology.
On the interactive platform, facing questions from investors, multiple listed companies have also announced their gallium and germanium stocks.
Among them, Chihong Zinc Germanium stated that in 2022, the company's germanium products contained 55.86 tons of germanium. The company currently has a primary germanium production capacity of 60 tons, accounting for about one-third of the global market share and half of China's market share.
Hengguang Group also disclosed that the design production capacity of its germanium products is 20000 kilograms per year, and the specific production may fluctuate depending on the market demand and raw material supply each year.
According to Wind data, on the 7th, gallium and germanium concept stocks experienced a pullback after several consecutive days of gains, with related indices accumulating gains of over 17% this week.
