Gaming out China’s next export controls on critical minerals 

China and the West could be on the precipice of a critical minerals trade war.

The risk of losing access to key Chinese mineral exports has weighed on companies and governments worldwide since July 2023, when China launched its first tit-for-tat mineral export restrictions on gallium and germanium in response to US-led tech controls. In the months since, China has tightened licensing requirements for high-end graphite (October 2023) and banned exports of rare earth element (REE) permanent magnet manufacturing technologies (December 2023) – all in response to foreign tech controls and investigations that threaten its industrial interests.

All signs point to further export controls in the year ahead. The big question is which mineral export China will set its sights on next.

We have seen very few models for anticipating new controls. Meanwhile, much foreign analysis assesses existing export controls – but chiefly from the perspective of Western interests and vulnerabilities. Such framings fail to center China in its own terms, as is necessary if we want to understand: Which controls can China meaningfully deploy, in line with which specific interests, and with what domestic consequences?

With that in mind, Trivium developed a framework for assessing the controls China perceives most in its interests. In total, we assessed 73 critical minerals – and present the nine we found to be at the highest risk of future controls.

Below, we walk you through the framework we used to make those determinations before discussing the nine minerals.

But first…

The backstory: China’s rationale for mineral controls

Since 2018, the US and its allies have rolled out a series of sanctions and trade restrictions against China and Chinese companies.

The most impactful of these were export controls imposed by the US Commerce Department in October 2022, which were designed to constrain China’s access to – and ability to manufacture – advanced semiconductors. The controls are part of the Biden Administration’s “small yard, high fence” strategy to ensure “strategic competitors [cannot] exploit American and allied technologies to undermine American and allied security” – including high-end, AI-oriented chips. And by “strategic competitors,” Biden means China. This has proven to be a massive thorn in Beijing’s side, as obtaining and manufacturing advanced semiconductors is key to many of China’s long-term technological, social, and political ambitions.

Shortly after the US imposed these controls, it also successfully lobbied its allies – specifically Japan and the Netherlands, two other global semiconductor powers – to impose similar controls, effectively shutting off all avenues by which China could acquire the materials and equipment necessary for advanced semiconductor manufacturing and advanced AI processing.

Beijing perceived the October 2022 controls – as well as the sanctions on Chinese companies such as Huawei and ZTE that preceded them – as an attempt to contain China’s economic development and technological advancement. Though Washington has repeatedly argued that these efforts are aimed not at containing China, but at protecting US national security, Beijing has become convinced that the US ultimately intends to derail China’s rise.

But China has few ways to fight back. Among its small arsenal of possible avenues for retaliation, imposing export restrictions on critical minerals is the most practical option. China remains the world’s top source of myriad critical minerals and/or their processed end-products, giving it leverage over a huge range of downstream consumers. Critical minerals go into everything from semiconductors to batteries to defense systems – i.e., they are central to a host of tech, energy, industrial, and military interests – and advanced manufacturing powers like the US, Japan, and the Netherlands are to varying degrees dependent on Chinese minerals and mineral processing.

Since July, China has progressively escalated export restrictions in a pattern of tit-for-tat retaliation against Western controls.

First was gallium and germanium:

• On May 23, Japan – a top producer of high-end chips – finalized strict chip export controls in line with the US control effort.
• On June 30, the Netherlands – home to ASML, which makes the world’s most cutting-edge chip manufacturing equipment – similarly imposed restrictions on ASML’s export of chip production equipment to China.
• On July 3, China imposed export controls on chip minerals gallium and germanium and associated compounds.

Next came graphite:

• On September 13, the EU launched an investigation into China’s highly subsidized electric vehicle (EV) industry, threatening tariffs that could wreak havoc on China’s strategic EV and battery industries.
• On October 17, the US tightened its controls on China’s access to advanced chip manufacturing technology – including blocking Nvidia from selling China advanced AI chips.
• On October 20, China imposed export controls on high-purity and spherical graphite used in – you guessed it – EV batteries and semiconductor equipment.

And then came a warning shot indirectly targeting rare earth elements (REE):

• On December 21, China blocked exports of material processing technologies for making rare earth permanent magnets, used in EVs, turbines, and all kinds of electronics.
• The block serves to undercut Western efforts to cut China out of its REE supply chains and as an implicit threat that it could also cut off exports of the minerals themselves if further threatened.

Although China has instituted these levers of control, we have not yet found evidence of Beijing blocking any actual mineral exports to strategic competitors. For now, Beijing aims to use its ability to block exports if it so chooses as a deterrent against further Western antagonism. (Notably, gallium, germanium, and graphite exports have fallen, but because foreign consumers have changed procurement patterns due to the suddenly high risk of disruptions. As far as we’ve seen, Beijing is still approving the export applications it receives.)

Nonetheless, Beijing’s threat is credible; it has cut off mineral exports as a punitive tool in the past. In 2010, China halted REE exports to Japan for two months after a Chinese vessel collided with Japanese vessels in disputed fishing waters, and Japan detained the Chinese captain. The REE export restrictions directly targeted high-value Japanese industries including wind turbines, hybrid vehicles, and military weapons. The restrictions were dropped after the countries reached a political resolution.

Then and now, China has consistently denied that mineral controls were imposed as a form of political retaliation, typically claiming they are to protect domestic interests. Except, none of these long-standing interests appear to have needed protection until corresponding foreign controls were imposed, despite years, if not decades, of time to take action previously.

It’s worth noting that China also has plenty of legitimate reasons to safeguard its mineral resources – and not all its mineral policy efforts are geared towards establishing a framework for retaliating against strategic competitors. Beijing has recently initiated widespread reforms of its mineral resource governance systems, partly because illegal production, insufficient data collection, and poor governance still plague the industry, and partly because China’s economic upgrading and decarbonization strategies hinge on many minerals it largely sources from overseas, and it aims to mitigate these vulnerabilities.

That said, China’s latest trade legislation does signal that there is an ongoing high risk that mineral policy will also be used to hit back at its strategic competitors in the near term. In late December, China’s legislature added new language to the Tariff Law that makes its (long-denied) tit-for-tat controls strategy more explicit – affirming that “China may take corresponding [counter]measures in accordance with the principle of reciprocity.” The same week, the State Council also approved a Mineral Resources Law revision emphasizing minerals’ central role in national economic security, and pushing for increased domestic extraction and overall supply chain control.

Looking ahead, the US, EU countries, and Japan will remain the primary antagonists threatening China’s domestic industrial interests. Hence, they will also be the chief targets of new Chinese controls.

Our framework

For us, there are five key criteria that are most likely to shape Beijing’s choice of minerals for export controls. The first three are positive motivators, or reasons policymakers might deem associated controls as effective and worth advancing. The latter two represent negative motivators, or reasons China might hold back from implementing associated controls.

1. Criticality to strategic competitors’ domestic interests: Beijing will choose minerals that Western and/or aligned countries (like Japan) deem “critical” to their domestic industries – as reflected in their respective critical minerals and materials lists.

2. Strategic and symbolic reciprocity: Export controls need to materially impact target countries’ ability to produce semiconductors, batteries, and/or dual-use technology, or disrupt other high-tech supply chains. This is essential for both symbolic and practical utility as a tit-for-tat measure.

3. Chinese advantage: Extraction and/or processing needs to be concentrated in mainland China, giving Beijing leverage.

4. Non-dependence: Beijing will mitigate risks to its own supply chains by avoiding categories where China dominates processing but depends heavily on imported raw materials from the West.

5. Minimal domestic disruption: Beijing will avoid adopting export controls that risk undermining domestic industrial enterprises in strategic industries – namely, export-dependent enterprises that are also critical to domestic supply chains.

We used the first criterion to filter which specific minerals to assess. In short, we evaluated all 73 minerals that appear on at least one of the official US, EU, Japanese, and Chinese critical minerals (and equivalent) lists – these are the key candidates for tit-for-tat retaliation. From there, we investigated each mineral with respect to the other four criteria.

The point system

We employed a point system to rank the likelihood that controls might be imposed on any given mineral. Minerals that received the most points were ranked as more likely to be controlled. Conversely, those with the least points were ranked as less likely to be controlled.

1. How many and which critical mineral lists is the mineral on?
   • On US’s list: +5 points
   • On EU’s list: +5 points
   • On Japan’s list: +3 points (as a proportionally lower-priority target for Beijing)

2. Is the mineral a key input for a foreign strategic industry?
   • Key input for foreign semiconductor industry: +5 points
   • Key input for foreign battery industry: +5 points
   • Key input for foreign dual-use technology: +5 points
   • Key input for other foreign high-tech manufacturing industry: +3 points

3. Is extraction and/or processing concentrated in China?
   • China represents >75% of extraction: +5 points
   • China represents >75% of processing: +5 points
   • China represents >50% of extraction: +3 points
   • China represents >50% of processing: +3 points
   • China represents >25% of extraction: +1 points
   • China represents >25% of processing: +1 points

4. Is China dependent on Western imports for this mineral?
   • China imports >75% of ores/raw materials from overseas: -5 points
   • China imports >50% of ores/raw materials from overseas: -3 points
   • China imports >25% of ores/raw materials from overseas: -1 points

5. Is China’s domestic industry dependent on exports of this mineral?
   • China exports >75% of domestic production: -5 points
   • China exports >50% of domestic production: -3 points
   • China exports >25% of domestic production: -1 points

It’s worth noting that our assessment depends partly on estimates of Chinese import/export dependencies – which are relatively poor for numerous minerals. Indeed, central regulators are actively trying to improve data collection so they better understand their positioning. Thus, our calculations are based on a combination of Chinese official data (where available), US Geological Survey historical estimates, and Chinese and international industry estimates.

The danger zone: The top at-risk minerals

Below, we list the nine minerals our framework identifies as most at risk of export controls. To be clear, Beijing has not indicated that any of the below minerals are imminently slated for controls, but should tensions rise and controls be imposed, our framework indicates these are the most likely candidates.

1. Tungsten (33 points)

• Included on three of three target critical mineral lists: Tungsten is present on the critical mineral lists of the EU, the US, and Japan.
• High strategic industry dependence: Tungsten is extensively used in military applications, the auto and aerospace industries, and the metals, mining, and petroleum industries.
• China dominates production and reserves: China currently represents 81% of global tungsten production and 52% of reserves. No other country controls more than 4.5% of production or 13% of reserves.
• Low import dependence: While China is also among the world’s top consumers of tungsten, it’s also the top exporter – giving it significant potential leverage. Controls don’t appear imminent, but remain a viable future option.
• Modest/low export dependence: In the last officially confirmed data (2022), China exported ~19% of production. Domestic industry faces exposure to export controls, but not enough to significantly counter broader strategic objectives.

2. Rare earth elements (REEs) (30 points)

• Included on three of three target critical mineral lists: REEs are present on the critical mineral lists of the EU, the US, and Japan.
• High strategic industry dependence: REEs – a set of 17 chemically similar elements – are critical to an enormous range of military, industrial, and consumer applications thanks to their use in permanent magnets, semiconductors, batteries, lasers, and other electronic components. They’re critical to economic and security strategy, both in China and globally.
• China dominates production and reserves: Its dominance is poised to persist in the medium term, with China currently representing 68% of mine production and 80-90% of rare earth permanent magnet production. It currently limits output (both extraction and smelting/separation), but not (yet) exports. It’s worth noting that the implementation of production limits has been challenged by persistent illegal production. However, export controls would be much easier to implement than existing production controls.
• Very low import dependence: China is effectively self-sufficient. The chief caveat: Japan continues to lead in high-end magnet production – a key downstream REE industry for which China maintains modest demand. However, this should not affect Beijing’s decisions vis-a-vis upstream controls.
• Very low export dependence: While China is the key global exporter of processed REEs, it is also by far the biggest consumer of its own REE products.

3. Vanadium (30 points)

• Included on three of three target critical mineral lists: Vanadium is present on the critical mineral lists of the EU, the US, and Japan.
• High strategic industry dependence: Vanadium is a critical alloy metal most commonly used in high-strength steel, with broad military, industrial, and nuclear energy applications. It is also the most promising base for long-duration redox flow batteries, an emerging energy system solution.
• China dominates production, and holds sizable reserves: It represents 68% of global vanadium production despite a comparatively low 23% of global reserves – plenty to meet medium-term demand. It is also the US’s second-largest import source.
• Virtually no import dependence: China can meet all of its known vanadium needs.
• Low export dependence: Ore exports are difficult to track but are overall limited. China exports significant quantities of downstream products, but there is no evidence that upstream industry is meaningfully dependent on exports for cash flow.
• On the flip side: Other countries are not necessarily as dependent on China for vanadium as it first appears. Since China does not have the market cornered on reserves alone, the main barrier to alternative sourcing is cost – and the key production processes are not nearly as complex as, for example, REE processing. If concerned countries invest appropriately, they could further lessen the viability of Chinese vanadium export controls as a punitive tool.

4. Magnesium (28 points)

• Included on three of three target critical mineral lists: Magnesium is present on the critical mineral lists of the EU, the US, and Japan.
• High strategic industry dependence: Magnesium is highly corrosion resistant, making it important to myriad industrial alloys – particularly steel and aluminum. These alloys are critical to many military applications, communication equipment (including satellites), and the auto industry, as well as certain semiconductors.
• China dominates production: China controls over 88% of magnesium production. No other country controls more than 2.7% of global production. Meanwhile, magnesium is not a scarce mineral, with potentially billions of metric tons available just from seawater. (Russia holds the world’s largest magnesium carbonate reserves, followed by China, but these are not inherent bases for overall supply dominance.) China dominates the industry on the basis of its investments in extraction and smelting equipment, as well as scrap supply.
• Virtually no import dependence: China meets its own magnesium needs.
• Medium export dependence: Exports represent over 50% of domestic production, creating sizable potential domestic impacts from controls. However, China could likely mitigate the impacts by using a licensing regime that targets only specific countries; since it dominates global production and supplies so many countries, the net losses could, in theory, be made quite manageable.

5. Copper (27 points)

• Included on one of three target critical mineral lists: Only the EU lists copper in its central list of critical raw materials. That said, the US Department of Energy also lists copper as a critical material for energy. Japan’s economy is highly dependent on the mineral and its Ministry of Economy and Industry is actively searching for new sources to support supply chains. Copper is perennially in contention for other critical mineral lists, and we would not be surprised to see it added to more critical mineral lists soon as mineral-related geopolitical tensions escalate.
• Extremely high strategic industry dependence: Copper is one of only two studied minerals (in a pool of 73) deemed critical for every industry considered in this study – the other being graphite, which already faces export controls. Moreover, it is difficult to replace in many common applications, including most electronics (aluminum being a distant runner-up as a potential alternative).
• China leads global smelting capacity: Chinese smelters represent around one-third of global ore smelting and refining capacity (and rising). Meanwhile, China does not hold globally significant copper reserves, though it controls significant copper operations both at home and abroad – and is increasingly diversifying its overseas copper assets. It’s worth noting that US-friendly Chile, US ally Australia, and the US itself (among other sources) have ample reserves and mine production – though not the smelting capacity to make it all usable.
• Modest import dependence: China imports significant quantities of copper ore to fuel its smelting industry. However, its risks are somewhat mitigated by Chinese companies’ ownership of many global extraction operations. China is not dependent on downstream refined copper imports.
• Low export dependence: China is a major consumer of its own refined copper. While its industry would take an appreciable hit from downstream copper product export controls, we judge the potential impacts insufficient to prevent Beijing from seriously considering the option.

6. Indium (25 points)

• Included on three of three target critical mineral lists: Indium is present on critical mineral lists of the EU, the US, and Japan.
• Medium-high strategic industry dependence: Indium is an essential, hard-to-replace input for electronic display technologies, also used in LED semiconductors and 5G systems (in InP-based lasers), for which demand continues to grow.
• China dominates production: China controls around 66% of global refinery production. Reserves are hard to estimate, as most raw supplies are recovered as byproducts from a wide variety of ore types (as well as from indium tin oxide (ITO) scrap).
• Virtually no import dependence: China meets its own indium needs.
• Modest export dependence: China exports roughly 25% of its indium – a noteworthy cost that would be much harder to mitigate than, say, magnesium, as it is used by a much smaller set of countries that mass-produce consumer electronics.
• Meanwhile: Potentially mitigating China’s ability to leverage indium export controls, the other major producers are Belgium, Canada, Japan, and South Korea – all of which could, in principle, increase supplies if needed.

7. Titanium (25 points)

• Included on three of three target critical mineral lists: Titanium is present on critical mineral lists of the EU, the US, and Japan.
• High strategic industry dependence: Titanium’s incredible strength-to-weight ratio makes it essential to aerospace applications (both civil and military), while its corrosion resistance makes it a mainstay in the chemicals industry and nuclear waste storage systems.
• China leads, though doesn’t dominate, production and reserves: China extracts 36% of the world’s ilmenite – the mineral from which 90% of titanium supply is derived – and holds 30% of ilmenite reserves. It further leads the production of key downstream titanium products.
• No known import dependence, but potential risks: In recent years, China has increased its titanium oxide imports, potentially indicating domestic industry chain issues that could complicate trade controls – though this is speculative.
• Modest export dependence: Tracking titanium flows proves tricky, but our estimates suggest that over 50% of production ends up overseas in one form or another. This indicates a sizable potential downside that would likely prove difficult to mitigate.

8. Antimony (24 points)

• Included on three of three target critical mineral lists: Antimony is present on critical mineral lists of the EU, the US, and Japan.
• High strategic industry dependence: Antimony is used in semiconductor manufacturing (as dopants antimony oxide and antimony trichloride), lead-acid batteries, synthetic lubricants, and various chemical industry applications. Recent mineral research puts antimony in the top seven scarcest minerals, facing exhaustion within 150 years (Elsevier).
• China leads production and reserves: China represents 48% of global mine production and 32% of reserves; Tajikistan and Russia follow in production and reserves, respectively.
• High current import dependence: Interestingly, despite its high production reserves, China also imports large quantities of antimony – chiefly from South Korea and Tajikistan. Quite simply, it uses a lot of the stuff – evidently much more than it can currently produce. The US has reportedly re-exported modest amounts of antimony to China, though little enough that China could replace those flows from other partners in the event of a trade war.
• Virtually no export dependence: As of the last estimate, China exported just 4% of production. Notably, it actually lowered barriers to exporting the mineral in November 2023, removing certain certification requirements – though this doesn’t protect against future controls.

9. Bismuth (24 points)

• Included on two of three target critical mineral lists: Both the US and the EU – the primary targets of China’s recent controls – categorize bismuth as a critical mineral.
• Medium-high strategic industry dependence: Bismuth plays niche but important roles in a broad spectrum of applications, notably including the production of myriad industrial alloys, ceramics, and synthetic materials (like nylon and rubber), as well as various medicines, including certain experimental cancer drugs (not just Pepto Bismol!).
• China dominates production: China maintains an estimated 80% of global refinery production. Bismuth reserves are difficult to quantify, as supplies are mostly recovered as a byproduct of copper, gold, lead, silver, tin, and tungsten production. Since it is largely recovered as a byproduct of widely distributed smelting and refining operations, it would be difficult for China to truly stopper long-term global supplies. However, China could easily cause major industrial disruptions with sudden export curbs – many of which could prove a hassle for governments to manage, given bismuth’s niche production methods and applications.
• Significant import dependence: Despite leading global bismuth production, China is also the world’s #2 importer of the element (behind the US) – a testament to the scale of its use in low- and mid-grade industrial applications.
• Low export dependence: Bismuth is upstream of valuable Chinese exports; export controls on bismuth itself do not represent a major threat to domestic producers. They could, however, cause disproportionate headaches for foreign industrial consumers.

(Wherever possible, production and reserve data come from the latest USGS estimates, published in January 2024. Where unavailable, estimates were made based on customs data, industry reports, and policy statements. Estimates of Chinese import and export dependence vary in confidence based on data transparency and quality, among other factors. If you have data we don’t, get in touch!)

(NOTE: Point totals were updated on March 14, 2024, in line with a minor retooling of weights. Rankings remain entirely unchanged.)

What about the three “G”s? This list excludes minerals that have already been controlled. As a stress test of our model, we assessed the minerals that China has recently subjected to export controls.

• Graphite, germanium, and gallium ranked #2, #4, and #5 among our highest-risk metals, respectively.
• As of December 2023, graphite faces a strict licensing regime, while germanium and gallium face export controls – so we’ve left them off the list above.
• REEs, ranked #2 in the final list presented above, haven’t yet seen direct export controls – but Beijing has recently instituted export restrictions on rare earth extraction and separation technologies.

Conclusion

Beijing’s policy decisions are always based on a complex set of considerations – not least when it comes to an issue as important as retaliation to foreign tech controls that threaten its domestic development interests. We can’t know every factor that will inform any given export control – and we don’t believe even central policymakers have yet mapped out a clear mineral control strategy. From within the set of practical export control options, China’s specific choices will partly depend on the provoking action – e.g., it may symbolically target a specific industry associated with new foreign controls.

But we believe this framework captures the most fundamental considerations Beijing will have to grapple with. It’s imperfect – but it’s a far sight better than assessments based on Western interests, which only represent part of what Beijing must consider.

Remember, policymakers are also working with imperfect information about highly complex global supply chains, all the while balancing competing domestic and foreign policy objectives. Indeed, in many cases, we found mineral and industry information lacking or inconsistent, complicating even basic assessments. As global interest in the issue grows, expect information and understanding to improve – and Beijing’s decision-making to evolve accordingly.

In the meantime, know your exposure. There’s no cure like prevention. Trivium is here to help you understand, monitor, and manage risks associated with Chinese export controls. If your organization faces exposure, get in touch to set up a free consultation.