Shares of Chinese chip metal makers rise amid export restrictions

Shares of Chinese companies producing metals used in chips and other electronics grew up after the Chinese authorities the day before introduced restrictions on the export of gallium and germanium. Shares of Yunnan Lincang Xinyuan Germanium Industrial, Yunnan Chihong Zinc & Germanium, Zhuzhou Smelter Group rose by 10% or more, shares of Yunnan Luoping Zinc & Electricity, another company in the same sector, rose by 5%. According to Li Weiqing, a fund manager at JH Investment Management, the shares rose because investors expect the prices of these metals to rise sharply after the imposition of restrictions and this will offset the decline in their exports.

According to experts, the measures of the Chinese authorities are a response to the restrictions imposed by the United States on the import of various modern technologies into the country. More than 80% of the world production of gallium and germanium is located in China. Moreover, these metals, which are by-products of processing other types of raw materials, including coal and bauxite, cannot be called rare or difficult to produce. Therefore, according to experts, in the long term, this measure will only reduce China’s role in the market for such metals.

China has been able to keep gallium and germanium prices low thanks to high-volume economies and government subsidies, Eurasia Group analysts say. This did not allow manufacturers from other countries to successfully compete with China in this market. “But China’s past attempts to capitalize on this dominance by restricting exports have reduced global availability (of these metals.— “b”) and increased prices. Higher prices, in turn, spurred foreign competition,” they note.

Yana Rozhdestvenskaya