Insight: Rattled by China, West scrambles to rejig critical minerals supply chains

Northern Graphite

06/12/2024 10:35

* 
      Henkel halts delivery of some products due to lack of
antimony -
letter to clients
    

        * 
      Chinese restrictions have prompted a surge in prices of
strategic metals
    

        * 
      Western industrial players seek alternative sources to
reduce
reliance on China
    

        * 
      Some North American antimony, graphite players ramped up
output
    

  
    By Amy Lv, Divya Rajagopal and Ernest Scheyder
       BEIJING/TORONTO/LONDON, Dec 6 (Reuters) - China's trade
restrictions on strategic minerals are starting to hit Western
companies where it hurts.
    Blaming Beijing's curbs on antimony exports announced in
August, German chemicals and consumer goods heavyweight Henkel
 HNKG.DE  told customers last month it had declared force
majeure and suspended deliveries of four types of adhesives and
lubricants widely used by automakers, according to a Nov. 8
letter to clients reviewed by Reuters.
    Henkel uses the silvery metal to make its Bonderite and
Teroson-branded products, core parts of the company's adhesive
technologies division, which brought in 10.79 billion euros
($11.4 billion) in revenue last year.
    "We have been notified by our suppliers that the importation
of these raw materials has been delayed pending the Chinese
government accepting license applications," according to the
letter, which was signed by two senior executives.
    "As a result, Henkel is hereby declaring force majeure in
connection with its deliveries of these products," the German
company also said, adding it was unable to predict the duration
of the situation.
    The letter from Henkel, which had not been reported
previously, and conversations with more than two dozen traders,
miners, processors, end-users, and industry experts in North
America, Europe and China underscore the severe disruption
caused by Beijing's trade restrictions and highlight how Western
players' struggle to replace China-based supply chains. 
        Contacted by Reuters about the letter, Henkel said it
was working to support its customers and find alternative
supplies: "We are monitoring the global supply situation of
antimony very closely and aim to restore solutions to fulfill
our customers’ orders."
    The price of antimony, scarce in nature but essential for
military equipment such as ammunition, infrared missiles,
nuclear weapons, and night vision goggles, rallied nearly 230%
this year to about $39,000 per metric ton in Rotterdam's busy
spot market, according to market intelligence provider Argus.
    China is the world's largest antimony producer and dominates
the production of many strategic materials.
     Last year, Beijing also limited exports of gallium and
germanium - used for semiconductors, solar panels and weapons -
as well as certain types of graphite - a key component in EV
batteries. 
    Responding to a fresh U.S. crackdown on China's chip
industry, Beijing this week further ratcheted up pressure,
imposing an outright ban on exports of gallium, germanium and
antimony to the United States, where Henkel makes Bonderite in
Michigan.
     
   
    LOOKING FOR ALTERNATIVES   
    Beijing's restrictions bring added urgency for Western
players to cut their reliance on minerals from China.
    Miner Perpetua Resources  PPTA.O , for instance, is
developing an antimony mine in Idaho with U.S. government
funding.
    But new mines can take years to develop, leaving players
like Henkel scrambling to find alternatives, which are often
more costly.
    "Please note that we are in close contact with our suppliers
and using all commercially reasonable means to leverage our
global supply chain to address this situation and support our
customers," Henkel also wrote in the letter.
    Meanwhile, some Western miners and processors have started
to build up capacity.
    United States Antimony  UAMY.A  (USAC), the only North
American processor of the metal, made plans to lift output at
its Montana smelter, which was running at 50% of capacity after
China announced curbs on antimony exports in August.
    "Our decision to ramp up production was predominantly
triggered by the more than tripling of worldwide Rotterdam
antimony prices," the company's chairman, Gary Evans, told
Reuters.
    China's restrictions "created significantly more demand for
our finished products," he added.
    Mining at the Montana site was halted in 1983, when it was
cheaper to source antimony from mines outside the United States,
and environmental curbs now prevent extraction there, according
to the company.
    USAC, which does not rely on China, is in talks to receive
the material from four other countries and one domestic supplier
as early as December, Evans said, declining to name them for
competitive reasons.
    Orders at Ottawa-based Northern Graphite  NGC.V , which
touts itself as North America's only producer of natural flake
graphite, jumped 50% in the aftermath of China's graphite curbs
announced in October 2023, CEO Hugues Jacquemin told Reuters.
    "When the export controls came into effect in December last
year, there was quite a surge in demand. We started ramping up
capacity," said Jacquemin, whose firm is developing projects in
Namibia and Ontario to add to its mine in Lac des Iles, Quebec.
    China accounts for over 70% of supply of both natural mined
graphite and its synthetic variety.
    Mark Jensen, CEO of ReElement Technologies, an arm of
American Resources  AREC.O  that specialises in recycling and
refining rare earths, said China's most recent export ban means
the company has this week fielded at least 10 calls from U.S.
miners offering zinc ore, which can be a source of germanium
during processing.
    Those shipments had previously gone to China for processing
given lower labour cost and different environmental standards,
he said.
    "We have been reaching out to U.S. suppliers of these
feedstock to sell these byproducts to us instead of sending it
to China as we are now an alternative to China," Jensen told
Reuters. 
    Canadian miner Teck Resources  TECKb.TO , which produces
germanium as a byproduct at its Red Dog zinc mine in Alaska and
is the only supplier of the metal in North America, told Reuters
it was studying whether to boost output of the critical material
there now that China has blocked exports to the United States.
    
    DISRUPTED MARKETS
    China's export squeeze has triggered a surge in prices for
many strategic minerals.
    Gallium sold outside of China was 30% to 40% more expensive
than in the People's Republic in the first half of 2024 from a
year before, according to Toronto-based Neo Performance
Materials  NEO.TO , which produces gallium by recycling
manufacturing scrap, said in August.
    In China, the restrictions have forced some weaker players
out of the market, traders and analysts told Reuters.
    Two Chinese germanium traders told Reuters they had given up
on exports as they were unable to secure licenses either because
overseas clients were unwilling to provide specific details on
end-users or because they are from the United States.
    Even before Beijing's latest curbs singling out the United
States, no Chinese germanium or gallium was shipped there this
year through October, Chinese customs data show. Over the same
period in 2023, the U.S. ranked as the fourth- and fifth-largest
export market for the minerals.
    For end-users, China's restrictions underscore the
importance of supply diversification.
    "When you de-risk, you need to de-risk with different
levers," said Maxime Picat, chief purchasing officer at
automaker Stellantis  STLAM.MI . "If you are a one-solution
company, knowing that your battery suppliers are all Chinese or
all Korean, then you are at risk." 
    ($1 = 0.9465 euros)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The share of antimony mined production by country    https://tmsnrt.rs/3ZBF7QN
Antimony prices in Europe and China    https://tmsnrt.rs/3ZBzKB0
Germanium and gallium are costlier outside China than inside
China    https://tmsnrt.rs/4gfkgrO
Some niche metals have outperformed bulk commodities so far this
year    https://tmsnrt.rs/3ZO9jZf
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Amy Lv in Beijing, Divya Rajagopal in Toronto,
Ernest Scheyder in London and Alessandro Parodi in Gdansk;
Additional reporting by Giulio Piovaccari in Milan and Sabine
Siebold in Berlin; Editing by Tony Munroe, Veronica Brown and
Lisa Jucca)
 ((mailto:Amy.Lv@thomsonreuters.com;))