China's New Export Blockade: Is the Global Economy Facing a Lithium and Gallium Supply Crash?

China is further expanding its strategic control—perhaps in wise anticipation of the coming Trump era. In response to Biden’s restrictions on high-tech chips, China is now restricting technologies that are critical for the production of lithium batteries and the refining of gallium. These commodities are indispensable not only for electric mobility but also for the production of semiconductors and high-tech products. Without these critical metals, global battery manufacturing as well as semiconductor production could suffer a severe setback.

In the course of the chip war with the USA, China had already introduced similar export restrictions for rare earths in December 2023—metals that are also crucial for the production of high-tech products, electric vehicles, and not least for the defense industry. This decision, a possible retaliation for Biden’s semiconductor restrictions, has not only shaken global markets but also led to an intensification of trade conflicts between the USA and China. The latest announcement, which now also affects lithium and gallium, must be understood as a further step in this geopolitical confrontation, which is about nothing less than global technological supremacy.

Lithium, the commodity for batteries, and gallium, an essential metal for the semiconductor industry, play a central role in key industries. While lithium is particularly indispensable for electric mobility and energy storage, gallium is a key material for the production of semiconductors, which are needed in virtually all electronic devices and in communications technology.

China controls not only a large portion of the global production of these materials but also the technological processes required for their refining. According to Statista, approximately 98 percent of the world’s primary gallium came from China in 2023, giving the country enormous market power. The technologies for lithium refining are also increasingly coming under China’s control, placing the country in a virtually unchallenged position.

The impact of these planned export restrictions is also clearly felt in Europe. The European Union had already responded several months ago, calling on aluminum and zinc producers to review their production capacities for critical metals such as gallium. The European metal industry is now under pressure to develop its own alternatives in order to become more independent.
Eurometaux, the umbrella organization of the European metal industry, emphasized that such a transition requires significant investments. The industry must not only invest in new technologies but also take into account the high energy costs in Europe, which additionally burden competitiveness. Similar pressure comes from the industry association European Aluminium, which points to the necessity of securing the economic viability of production processes before a by-product such as gallium can be profitably manufactured.

The current export restrictions fit into the broader context of increasing trade wars between China and the USA. In early December 2023, China imposed a comprehensive export ban on important commodities such as gallium, germanium, and antimony to the USA. (We reported) This action was met by the USA with the introduction of new tariffs on Chinese solar products, further fueling tensions. Both countries are fighting not only for market access but also for technological dominance in key industries. In doing so, they are outbidding each other with increasingly severe sanctions.

Should China implement these new export restrictions, this will have far-reaching consequences for global industry. Companies that rely on lithium batteries, such as manufacturers of electric vehicles and storage solutions, could face significant production bottlenecks. The semiconductor industry could also suffer from the restriction, as gallium is a key material for the production of microchips.

Western industries, particularly the USA and Europe, must now invest in their own production capacities and alternative supply chains. However, the challenge remains enormous: without China’s know-how and resources, it will take years before Western countries can develop comparable competitiveness.

The export restrictions announced by China are just another step in the ongoing sanctions ping-pong. A relaxation of the situation following the election of Donald Trump as US President is rather unlikely—we can therefore assume that the strategic maneuvers in the global chess game over commodities, technology, and geopolitical power will continue. The international community now faces the challenge of preparing for potential restrictions and finding ways to become more independent. However, this will not be possible without significant investments and political measures. In the meantime, the question of how global trade and power dynamics will continue to change remains a compelling topic for the coming years.