I heard a talk by James Kenneth Galbraith, son of economist John Kenneth Galbraith, today. One of his points was that gallium is essential to electronics, chips, etc. It is obtained as a byproduct from making aluminum. China produces a whole lot of aluminum, and the US not so much. Access to gallium is critical, and the Chinese have already squeezed the supply to get concessions from the US. How important is gallium? How much clout does this give China? JKG was hopeful this may be an important factor in reining in Trumpian policies and anti-China craziness, while cognizant of the chance it could make war more likely. What do others think?
Rare earth metals are something China has tried to monopolize, kind of like how Taiwan has monopolized semiconductors. Rare earth metals are necessary for modern electronics and renewable energy products, as well as modern military equipment.
I think the US is trying to diversity its rare earth supply to avoid being dependent on China.
Looking into it, gallium isn’t a rare earth metal, but China seems to have a long term strategy of monopolizing the metals needed for 21st century manufacturing.
A lot of these minerals can be found all over the place, and could easily be mined all over the place. The only reason why China currently dominates the markets is because lax safety regulations and low wages makes them cheaper to produce in China. But if we really wanted to, we could produce just as much domestically, and even if the product were ten times more expensive, that wouldn’t make a big difference in the price of computer chips, which mostly aren’t based on the price of the raw materials.
Exactly. The US used to hold China’s place on top of the aluminum smelting heap, but huge government investment, lax safety and environmental regulation, and cheap labor have caused the two countries to switch places at almost the same rate over the last 50 years or so.
But there’s not much about it that’s special to China, other than low costs and economies of scale, so China’s production of gallium is convenient, not nefarious. There are also other ways to get it- apparently there are deposits of gallium-bearing ore in Utah, for example.
Right, especially in a region as large and geologically diverse as the US. They are not really ‘rare’ at all. But various factors: economics of production, labor costs, and (probably) misguided fears of ‘pollution’ etc have driven them offshore.
It is rather depressing that the UK has shut down its last blast furnace and no longer has the ability to produce primary iron from raw materials. Goddamit, we used to be the HEART of the industrial revolution!
And aluminium production is almost extinct too (I used to work in an aluminium production facility as a tech as a summer job from University).
Software and service industries have their place… but ultimately, SOMEONE has to make the physical machinery that runs it all…
China’s commitment to industry, unlike the de-industrialization in the US and UK, is another factor. And if wikipedia is to be believed, the problem isn’t the scarcity of gallium, it’s the concentration, or lack of it, making gallium production through the making aluminum by far the most economic way to get it. I don’t think it’s nefarious of China at all. It was rather the mobility of US capital to flee economic sectors as well as places that was the problem JKG spoke to.
I disagree, China has a strategy of trying to monopolize mining and processing of various metals that are needed for 21st century technology.
Granted, other nations can get them. However it takes time to set up the mines and processing plants. After China drives the competition out of business, you can’t just set up the infrastructure in other countries, esp countries with environmental protections. It takes years to get things up and running.
China seems like it drove the rest of the world mostly out of business on things like gallium, rare earth metals, etc and now they can use export controls to obtain economic influence. Its like when walmart moves into town, drives all the other businesses out of business, then they have a monopoly and people can’t shop elsewhere.
China accounted for around 69% of the world’s production of rare earth ores in 20234. Far behind are the United States (12%), Burma (11%) and Australia (5%). Once these ores have been extracted, they need to be processed to separate, purify and refine each of the rare earths. However, China is the only country that carries out all these stages, with Australia and the United States selling some of their semi-processed ores back to China to complete the refining! China thus produces 85% of the purified light rare earths used worldwide, and 100% of the heavy rare earths.
Nations like Taiwan may have a de facto monopoly on the manufacture of semiconductors, but China has obtained a near monopoly on 20+ elements that are necessary for manufacturing advanced technology for military applications, IT products, renewable energy, etc.
Is it that China drove other countries out or that some abandoned the field searching for higher profits? Let’s say hypothetical US company X decides mining Y in the US is not profitable enough and either moves or shuts down its mining operations. Is that China’s fault? Is it a world-wide conspiracy that moved the US out of steel and aluminum and gallium production while China moved into those sectors?
Plese note this is not a call for “Chinese socialism” or “Chinese capitalism” or anything else.
My impression is China created an environment that made other producers of rare earth elements and other important elements non-competitive with China. This was an intentional strategy on China’s part to make the entire world dependent on China for the 20+ elements necessary for 21st century technology.
Like I mentioned earlier, when a walmart moves into town they may sell products at a loss. They lose money, but the goal is to drive all the other businesses into bankruptcy and destroy the competition.
It takes years and large amounts of money to set up new mining and refining facilities for these metals, and China can just temporarily drop the prices to shut those out of business if they get a foothold. China weaponized capitalism to make the entire world dependent on them for various elements needed for advanced manufacturing.
The Walmart analogy has some weight, but suggesting the Chinese economy has historically been the big boy on the block isn’t accurate. Presumably nothing prevented the US government and US capital from embarking on similar strategies. They didn’t. They preferred to seek higher, easier profits, move out of production, then cry foul and demand a new arms race to keep the government money flowing. Not saying China is innocent, but turnabout is fair play and US capitalism bears some responsibility for the current situation.
My point is that China weaponized the weaknesses of capitalism. Capitalism is concerned with the lowest cost of production, weakest environmental regulations and short term profits. China used these weaknesses to make sure that mining and refining the elements necessary for 21st century technology (military hardware, IT products, renewable energy products, etc) occurred in China because the environmental regulations were weaker and the cost of production was lower, and profits were higher. So all these things ended up moving to China. As was said in the OP, about 98% of Gallium processing occurs in China now.
And if other nations try to invest the time and capital to start their own mining and refining capacities (which takes years and billions of dollars), China can just increase supply to drive them out of business.
Not really. Maybe we could say that China’s lax safety and pollution regulation make them unfairly competitive. But in in most areas where China occupies the “dominant” spot, it’s international profit-seeking that helped build up those operations and continues to keep them there.
The West will always be hobbled by short-termism due to being driven by the profit-seeking motive of individual oligarchs. China takes a longer view of things. They’re willing to accept greater short-term pain and inconvenience for a longer-term strategic position.
Of course all of that depends on China’s ability to forecast what will be important in 10, 20, 50 years. Perhaps the technological or mineral-extractive landscape shifts in some dramatic way that ruins their plans. Long-termism has its own pitfalls.
I’m sure that China is not at all upset that they ended up dominating the markets, but that wasn’t the reason for their mines. The reason they mine all of those minerals is because it’s cheap there, because of the cheap labor and lax safety, and so they would have all of those mines even if the rest of the world declared them essential strategic resources and maintained their own capacity even at the higher cost.
China is the most capitalist country in the world. What they’re doing isn’t an attack on capitalism; it’s the logical end result of it. If capitalism were stronger in the US, we’d sacrifice workers’ health and well-being for the greater profits China is getting, too. Thankfully for us, we’re not yet completely controlled by capitalism like China is.
I’m not seeing China as the bad guy in this.
Wrt competitive practices it’s pretty much the same as opec and other natural resources, except that China hasnt really turned the screws (prices remained pretty stable for years until recent spikes in demand and the trade war).
And in terms of pollution and safety, regulations have improved a lot over the years. I’m not sure I would have prioritized growth over all, as the Chinese government has, but I do see the case for a developing country to initially make sacrifices.
I know how callous that sounds when we’re literally talking about lives being among the things being sacrificed but when you still have vast numbers of people below the poverty line (and so growth is a thing that saves lives), this is the kind of calculation that gets made.
I disagree. China isn’t the most capitalist nation, they used a public/private partnership to control a globally important strategic resource. They ran the smaller firms out of business, and consolidated the major rare earth companies into state owned firms so they can control the global marketplace, and manipulate prices to drive competition out of business.
https://www.npr.org/2025/07/23/nx-s1-5475137/china-rare-earth-elements
Starting in 2011, provincial authorities were instructed to mount unannounced audits of mines, to seize contraband ore and by-products, and when needed, dynamiting and smashing to pieces illegal mining operations.
“I saw firsthand how the private sector got squeezed out,” says Ruffle, the investor.
Within four years, China declared victory. It announced the closure of dozens of smaller mining and refining companies and guided the mergers of surviving companies into six supersized, mostly state-owned firms, nicknamed the Big Six in China.
Through the Big Six, China could now largely control both supply and price.
“Whereas before you had a lot more competition from different producers, now you get very homogeneous pricing,” says Jan Giese, a Frankfurt-based rare earth trader. “It’s difficult to have competitive bids.”
American upstarts
Unlike metal commodities like nickel or gold, there is no independent exchange for buying and selling rare earth elements.
Because Chinese companies can cause huge price fluctuations depending on how much they decide to produce or export, investors have been wary of pouring money into new ventures in the U.S., say U.S. refining and mining companies.
That has made raising capital to build refining plants a big challenge for American companies trying to break back into the industry.
Ironically I’ve heard North Korea could be the most capitalistic country on earth. They have an official communist economy, but the real economy is the totally unregulated black market economy
On December 23, 2021, China Rare Earth Group Co. Ltd, a state-owned enterprise (SOE) directly supervised by China’s state assets regulator was formally established in East China’s Ganzhou, Jiangxi Province. The newly launched rare earth mega SOE is a conglomerate of some top industrial producers, including the rare earth units of three of the “Big Six” SOEs that dominate the rare earth industry – Aluminum Corporation of China (CHALCO), China Minmetals Corporation, and Ganzhou Rare Earth Group Co., Ltd and two research companies – China Iron & Steel Research Institute Group and Grinm Group Corporation Ltd.
Industry analysts believe that the consolidation will enable China to raise its global competitiveness in the rare earth sector and increase its pricing power and production efficiency.