By Amy Lv, Divya Rajagopal and Ernest Scheyder
BEIJING/TORONTO/LONDON (Reuters) – China’s trade restrictions on strategic minerals are starting to hit Western companies where it hurts.
Blaming Beijing’s antimony exports announced in August, German chemicals and consumer goods heavyweight Henkel told customers last month that it had declared force majeure and suspended deliveries of four types of adhesives and lubricants in common use by automakers, according to a Nov. 8 letter to customers reviewed by Reuters.
Henkel (HEN3.DE) uses the silvery metal to make its Bonderite and Teroson branded products, core parts of the company’s adhesive technologies division, which generated sales of 10.79 billion euros ($11.4 billion) last year.
“We have been informed by our suppliers that the import of these raw materials has been postponed pending the acceptance of license applications by the Chinese government,” said the letter, which was signed by two senior managers.
“As a result, Henkel hereby declares force majeure in connection with the deliveries of these products,” the German company also said, adding that it could not predict the duration of the situation.
Henkel’s previously unreported letter and conversations with more than two dozen traders, miners, processors, end users and industry experts in North America, Europe and China underscore and highlight the serious disruption caused by Beijing’s trade restrictions how Western players are struggling to replace China-based supply chains.
Contacted 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 are committed to finding solutions to meet orders from to meet our customers’ needs.”
The price of antimony, scarce in nature but essential for military equipment such as ammunition, infrared missiles, nuclear weapons and night vision goggles, rose almost 230% this year to around $39,000 per tonne on the busy Rotterdam spot market, market information shows. supplier Argus.
China is the world’s largest antimony producer and dominates the production of many strategic materials.
Last year, Beijing also restricted exports of gallium and germanium – used for semiconductors, solar panels and weapons – as well as certain types of graphite – a key component of EV batteries.
In response to a new US crackdown on China’s chip industry, Beijing increased pressure this week and imposed 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 make it especially urgent for Western players to reduce their dependence on minerals from China.
For example, miner Perpetua Resources is developing an antimony mine in Idaho with funding from the US government.
But it can take years for new mines to develop, forcing players like Henkel to look for alternatives, which are often more expensive.
“Please note that we are in close contact with our suppliers and are 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 building capacity.
United States Antimony (USAC) (UAMY), the sole North American processor of the metal, made plans to boost production at its Montana smelter, which was operating at 50% capacity, after China imposed restrictions on the metal in August antimony export had announced.
“Our decision to ramp up production was primarily driven by the more than tripling of global Rotterdam antimony prices,” company chairman Gary Evans told Reuters.
China’s restrictions “created significantly more demand for our end products,” he added.
Mining at the Montana site ceased in 1983, when it was cheaper to source antimony from mines outside the United States, and environmental restrictions now prevent extraction there, the company said.
USAC, which is not dependent 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, which bills itself as the only producer of natural graphite in North America, rose 50% in the wake of China’s graphite restrictions announced in October 2023, CEO Hugues Jacquemin told Reuters.
“When export controls came into effect in December last year, there was a significant increase in demand. We started ramping up capacity,” said Jacquemin, whose company is developing projects in Namibia and Ontario to build the Lac des Iles mine to expand. Quebec.
China accounts for more than 70% of the supply of both naturally extracted graphite and its synthetic variant.
Mark Jensen, CEO of ReElement Technologies, a branch of American Resources (AREC) that specializes in recycling and refining rare earths, said China’s latest export ban means the company has received at least 10 calls from American miners this week that offer zinc ore. can be a source of germanium during processing.
Those shipments had previously gone to China for processing because of lower labor costs and other environmental standards, he said.
“We have contacted U.S. suppliers of these raw materials to sell these byproducts to us instead of sending them to China because we are now an alternative to China,” Jensen told Reuters.
Canadian miner Teck Resources, which produces germanium as a byproduct at its Red Dog zinc mine in Alaska and is the sole supplier of the metal in North America, told Reuters it was exploring whether production of the critical material could be done there be increased now that China has blocked production of the crucial material there. export to the United States.
Disrupted markets
The Chinese export crisis has led to a rise in prices for many strategic minerals.
Gallium sold outside China was 30% to 40% more expensive than in the People’s Republic in the first half of 2024 compared to a year earlier, according to Toronto-based Neo Performance Materials (N14.F), which produces gallium by mining production scrap recycle , said in August.
In China, the restrictions have driven some weaker players out of the market, traders and analysts told Reuters.
Two Chinese germanium traders told Reuters they had given up exports because they could not obtain licenses, either because foreign customers were unwilling to provide specific details about end users or because they were from the United States.
Even before Beijing’s latest restrictions hit the United States, no Chinese germanium or gallium was shipped there this year through October, Chinese customs data show. During the same period in 2023, the US was the fourth and fifth largest mineral export markets.
For end users, China’s restrictions underline the importance of diversifying supply.
“If you reduce risk, you have to reduce risk with different levers,” said Maxime Picat, chief purchasing officer at automaker Stellantis (STLA). “If you are a one-solution company, knowing that your battery suppliers are all Chinese or all Korean, you are at risk.”
($1 = 0.9465 euros)
(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)
