Weekly News Review December 30 2024 – January 5 2025

We wish all readers a happy and prosperous year 2025.

The first week of the new year has started as expected, with a relatively calm atmosphere in the commodity world, where Artificial Intelligence may soon play an increasingly significant role. Yet, China flexed its market power, floating possible new export restrictions.

CHINA DELIBERATES FURTHER EXPORT RESTRICTIONS ON STRATEGIC METALS:

The Chinese government has announced plans to expand its list of export-restricted items. In a notice issued Thursday, the Ministry of Commerce revealed the possible inclusion of various technologies related to the production of lithium batteries and the refining of lithium and gallium.

The ministry now seeks opinions from stakeholders and the public until February 1, the state-owned Xinhua news agency reports.

If implemented, these export curbs would hinder progress in lithium battery-making expertise in other countries, as China has a significant edge in this area. Analysts believe the plan is to keep this knowledge a secret to safeguard this advantage.

In December 2023, China introduced similar restrictions on technologies associated with the mining and refining rare earth elements, a sector in which the country also holds a dominant position as the world’s leading supplier.

The newest announcement is the latest escalation in the ongoing trade war between the United States and China. In early December, China’s Ministry of Commerce imposed a broad export ban on critical materials, including gallium, Germanium, and antimony, to the US, further intensifying tensions. The US imposed new tariffs on Chinese-made solar wafers and polysilicon, essential precursors for producing solar cells.

GALLIUM REFINING TECHNOLOGIES ALSO PART OF THE LIST:

The Ministry of Commerce document explicitly lists the technology to recover gallium metal from aluminum oxide. Gallium is mainly produced by processing bauxite ores into aluminum and zinc refining. According to data from the US Geological Survey, China accounts for roughly 98 percent of worldwide primary low-purity gallium. 

However, the know-how to extract gallium as part of aluminum production is available elsewhere, including in Europe. Shortly after the export restrictions on gallium and Germanium, which China imposed in August 2023, became known, the European Union called on aluminum and zinc companies to review the production of both technology metals.

Eurometaux, the umbrella organization for the European metals industry, has signaled a commitment to enhancing Europe’s supply of critical metals. However, achieving this objective hinges on the creation of conducive framework conditions. A potential expansion in production would necessitate substantial investment and operational costs, which Eurometaux has identified as a key challenge.

Additionally, the organization has highlighted the pressing issue of energy costs, which it considers excessively high and unacceptably high.

The industry association European Aluminum had expressed a similar view, pointing out that the economic viability of the leading business had to be secured before a by-product such as gallium could be produced.

STRATEGIC METALS MINING: BEZOS AND GATES JOIN THE FRAY WITH AI-POWERED EXPLORATION –

Mining startup KoBold Metals, backed by Bill Gates, Jeff Bezos, and other household names, has raised another $537 million in its latest funding round. According to the Financial Times, the round valued the company at almost $3 billion. The company said it will use forty percent of the raised capital to develop existing projects into mines, with the majority going to its ventures in Zambia.

In February, the company announced it had discovered the largest copper deposit in the Southern African country in a century, adding that it could become one of the world’s leading high-grade mines.

KoBold uses artificial intelligence in its exploration work to find deposits of battery raw materials, including copper, cobalt, and lithium. It employs the technology to sift through historical data and scientific models to identify possibly untapped mineral deposits. Financial backing in earlier funding rounds also came from Norwegian energy company Equinor and Japanese automaker Mitsubishi.

Located in Zambia, KoBold’s main project could benefit from the US government’s efforts to revive the Lobito Corridor, a railway link between Zambia, the Democratic Republic of Congo, and the Angolan port town of Lobito on Africa’s west coast. The infrastructure plan plays a pivotal role in efficiently transporting raw materials from Africa’s Copperbelt to global markets, positioning it as a strategic counterbalance to China’s Belt and Road Initiative.

Just in case you missed it, here is our brief end-of-year review, published at the end of December.

YEAR IN REVIEW: 2024

EUROPE:

De-risking and diversification remained key in 2024, at least when securing critical raw materials. From a European perspective, the Critical Raw Materials Act (CRMA) adopted in May established a legal framework for ensuring industrial supply. It promises faster approval processes and brings hope that the urgency of this issue has made its way onto the political agenda. However, the CRMA does not provide additional funding for building domestic value chains, from extraction to processing and recycling.

Instead, this responsibility is left to individual EU states, such as France, Italy, and Germany, which have set up raw materials funds. The German government has allocated one billion euros for this purpose, with budgets ranging from 50 to 150 million euros per project, provided they are approved by the Kreditanstalt für Wiederaufbau (KfW).

A set of non-energy, non-agricultural raw materials is considered critical due to their high economic importance and exposure to high supply risk, often caused by a high concentration of supply from a few third countries. Given the key role of many such critical raw materials in realizing the green and digital transitions and their use for defense and aerospace applications, demand will likely increase exponentially in the coming decades.

Introduction of the regulation EU-2024/1252 (Critical Raw Materials Act):

Another key element in raw material sovereignty is partnerships with countries rich in natural resources. In response to the call by EU Commission President Ursula von der Leyen in her 2022 State of the Union address, not only Germany but also France and the EU itself have taken action. The free trade agreement between the EU and the Mercosur countries, finalized in the last weeks of the year, also holds the potential to advance resource security. This includes future raw material superpowers like Argentina and Brazil, although the opposition from France and Italy may still jeopardize the preliminary agreement.

However, European states are not alone in this pursuit. High-tech hubs around the Pacific, including Japan, South Korea, and the United States, are also securing access to essential resources.

CHINA:

Of course, the often unspoken yet targeted recipient of efforts aimed at greater autonomy is not inactive. The expansion of the ‘New Silk Road,’ a colossal infrastructure and resource project, continues to progress. The inauguration of a cargo port in Peru in the fall demonstrated Beijing’s logistical ambitions in South America. Media coverage was impactful, though not groundbreaking, when highlighting the ownership of China’s resource wealth, infrequent earth: it belongs to the state.

This awareness of China’s market power, both domestically and globally, was further underscored by Beijing’s export restrictions. While restrictions on gallium and Germanium marked their first anniversary in the summer of 2024, they were tightened in December. For the first time, the US was explicitly cut off from gallium, Germanium, and antimony exports.

Industry experts agree that the reason lies in the US’s attempt to isolate China from access to the most advanced computer chips. This chip war has been simmering since October 2022 and continues to evolve with new developments.

“Rare earth resources belong to the state, and no organization or individual may occupy or destroy rare earth resources.”

Order of the State Council of the People’s Republic of China No. 785

UNITED STATES:

No easing is expected next year, as even the incoming US president, Donald Trump, has announced a tough stance against China, including high tariffs. Even before his inauguration in January 2025, the administration implemented new tariffs on various Chinese materials and minerals, such as tungsten. Additionally, there are reports that a reduction in subsidies for electric mobility is planned.

You see these empty, old, beautiful steel mills and factories falling. We will bring the companies back, lower taxes for companies that make their products in the USA, and protect those companies with substantial tariffs.

President-elect of the United States, Donald Trump:

Throughout this year, tariffs have repeatedly been used as a regulatory tool, including by the EU. Since July, preliminary tariffs have been imposed on electric cars from China, which were made definitive in October.

The measure was justified by the extensive subsidies provided by the Chinese government, which enabled manufacturers like BYD to offer their vehicles at significantly lower prices than Western companies. The European Commission has also launched investigations into state aid from Beijing for wind turbines and solar panels.

Given the growing polarization between East and West, will countries with close ties to both sides or those recalibrating their relationships with the US or China benefit? In addition to India, which is also seeking secure raw material sources for its emerging economy, Saudi Arabia is positioning itself as a key player.

The country aims to diversify its economy away from oil wealth, and in developing its mineral resources, it is turning to Western partners like Australia. At the same time, the US ally has recently been seeking closer ties with China. Countries like Brazil also position themselves as suppliers of critical raw materials.

The field of participants in the race for resource security is steadily growing. Still, in the long run, there is no way around China.

If you want to learn more about the benefits of owning strategic metals as physical assets, please respond to this email to schedule a free, no-obligation introduction call.