Gallium: Signs of an upturn in Chinese primary production
roskill.com
Posted 22nd October 2020 in ?Industry news.
By Patrick Stratton
After a difficult year or so, there are signs that China’s production of primary gallium (about 97% of the world total) is starting to recover, with several idled plants reporting a resumption of operations.
Roskill view
To a large extent, the recent problems relate to the aluminium industry. China is easily the world’s leading producer of aluminium and its industry is supplied with bauxite mined domestically and imported, which is refined to alumina with the resulting mother liquor processed to gallium by companies that are very often integrated with the aluminium producers. In mid-2019, the Chinese government began a series of environmental inspections on the country’s bauxite-mining operations. This resulted in a shortage of bauxite from Shanxi province, which happens to be where about half of China’s primary gallium is produced. Alumina refineries were forced to switch to imported bauxite. They key issue with this is that Chinese bauxite typically has a high gallium content and imported material usually does not. Whereas a gallium producer might need a liquor containing 190ppm Ga, what they were being offered contained perhaps 170ppm, or even zero in some cases. That made gallium production more difficult, in other words more expensive. It also came at the time of year when high temperatures usually cause a drop in production because the ion-exchange resins used to recover gallium are less efficient (they were also reportedly high-cost in 2019). Chinese gallium plants saw numerous shutdowns, some of them prolonged, and total production fell from 413t in 2018 to only 320t in 2019. It is clear from reading the news reports that primary gallium plants can be started and stopped fairly easily and quickly.
China’s monthly gallium production fell from 32-35tpm in the first half of 2019 to 20-28t and has remained in the 23-25tpm range in 2020. Month-end producer stocks, which had been 46t in April 2020, had fallen to 33t by September. That did not have much impact on gallium prices. Demand was down anyway and many consumers were delaying purchases in anticipation of the probable auctioning-off of the nearly 200t of gallium sitting in the defunct Fanya inventory (which was ultimately sold to a single buyer in October). There is almost certainly a lot of inventory in the system somewhere. Comparison of data for primary production and refined production suggest that a large cumulative surplus of primary gallium has built up over the years. Nobody seems to be quite sure where it is. Their reported inventories indicate that the Chinese producers are not holding it, reported consumer inventory in the USA is small and there is no US strategic stockpile. Roskill suspects that the Chinese government has a substantial gallium stockpile.
Recent reports indicate that things are picking up again in China. For the first time in 2020, September production was higher than it had been in 2019. Several producers have resumed production. One of them had been idle since 2010 and another indicated that it will be using domestic bauxite, which suggests a relaxation of the environmental crackdown.
An increase in production in China would be timely. In September, the Chinese government unveiled its plans to invest heavily in 5G infrastructure construction and promote rapid commercialisation of the technology. Massive expansion of China’s semiconductor industry is underway, with plans for new plants being announced frequently. That is all going to require a lot of gallium. The Chinese processors could certainly supply the material because capacity utilisation at present is about 50%. But they need feedstock. China’s reserves of gallium-rich bauxite are running out and there is probably only enough remaining to last for 10 years, at best. Recycling will certainly increase, although China now bans the import of waste materials. A further increase in bauxite imports is inevitable but that ore is more difficult and thus more expensive to process to gallium. Prices might well rise. It will also be interesting to see if the elusive stockpiles start to materialise.
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