Export Controls and Restrictions on Critical Minerals

Export controls on critical minerals have become one of the most potent tools of economic statecraft in the twenty-first century. As nations recognize that control over mineral supply chains confers strategic leverage, governments are increasingly willing to restrict the flow of raw and processed materials across borders. These restrictions take many forms, including export licensing requirements, outright bans on raw ore exports, quotas, tariffs, and administrative delays that effectively throttle supply. The consequences ripple through global markets, affecting prices, investment decisions, and the strategic calculations of importing nations that depend on concentrated sources of supply.

China's Gallium and Germanium Export Controls

In July 2023, China's Ministry of Commerce announced that exports of gallium and germanium products would require government-issued export licenses, effective August 1, 2023. The measure covered gallium metal, gallium compounds, germanium metal, germanium dioxide, and several other derivative products. While framed as a routine measure to protect national security and interests, the timing was widely interpreted as a retaliatory response to U.S. and allied semiconductor export controls aimed at restricting China's access to advanced chipmaking equipment.

The impact was immediate and instructive. China produces approximately 98% of the world's primary gallium and 60% of refined germanium. Within weeks of the announcement, gallium prices surged by over 25% on international markets, and buyers in Japan, South Korea, the European Union, and the United States scrambled to identify alternative sources. However, non-Chinese production capacity for these elements is extremely limited. Gallium is extracted as a byproduct of alumina refining, and only a handful of smelters outside China are configured to recover it. Germanium production outside China exists in Canada, Belgium, and Russia, but at volumes insufficient to replace Chinese supply.

In December 2023, China extended its export control regime to include certain graphite products, targeting the purified and shaped graphite used as anode material in lithium-ion batteries. This move struck directly at the electric vehicle supply chain, as China processes over 90% of the world's battery-grade spherical graphite. Subsequent expansions in 2024 added antimony, superhard materials, and additional rare earth processing technologies to the controlled list, signaling a broadening pattern of mineral trade weaponization.

Indonesia's Nickel Ore Export Ban

Indonesia's approach to export controls represents a different strategic calculus: resource nationalism aimed at capturing more value from the domestic mineral endowment. In January 2020, Indonesia implemented a complete ban on the export of unprocessed nickel ore, requiring that all nickel be processed domestically before leaving the country. The policy was explicitly designed to force investment in downstream smelting and refining capacity within Indonesia, transforming the nation from a raw material exporter into a producer of higher-value nickel products.

The ban succeeded in attracting massive investment, predominantly from Chinese companies. By 2024, Indonesia had become the world's largest producer of nickel pig iron and was rapidly scaling up capacity for battery-grade nickel sulfate. Chinese-funded industrial parks in Morowali and Weda Bay on Sulawesi island became major hubs for nickel processing, with companies such as Tsingshan Holding Group, Huayou Cobalt, and CATL investing billions of dollars. However, the environmental costs have been significant, including deforestation, tailings disposal challenges, and carbon emissions from coal-powered smelters. Indonesia has signaled intentions to apply similar export restriction models to bauxite, copper, and tin, suggesting that the nickel ban serves as a template for broader resource policy.

Other Notable Export Restrictions

The Chinese and Indonesian cases are the most prominent, but export controls on minerals are a global phenomenon. The Democratic Republic of Congo has periodically imposed export suspensions on cobalt and copper concentrates, often in the context of disputes with mining companies over royalties, taxes, or compliance with local processing requirements. Zimbabwe banned the export of raw lithium ore in December 2022, mandating that lithium must be processed domestically. Chile and Argentina have tightened conditions on lithium extraction licenses, requiring greater state participation and domestic value addition. India has restricted the export of certain grades of iron ore and imposed duties on mineral exports to preserve domestic supply for its steel industry.

Russia has used export restrictions as a retaliatory measure in the context of Western sanctions. In 2023, Russian officials discussed restricting exports of palladium, nickel, and enriched uranium in response to sanctions imposed after the invasion of Ukraine. While Russia has been cautious about implementing these threats due to its own dependence on mineral export revenues, the possibility of Russian supply disruptions has factored heavily into Western contingency planning, particularly for platinum group metals used in catalytic converters and hydrogen fuel cells.

The WTO Dimension

Export restrictions on minerals raise significant questions under World Trade Organization (WTO) rules. Article XI of the General Agreement on Tariffs and Trade (GATT) generally prohibits quantitative restrictions on exports, but exceptions exist for measures necessary to prevent critical shortages of essential products (Article XI:2(a)) and for measures essential to national security (Article XXI). China's rare earth export quotas were challenged at the WTO in 2012, and a panel ruling in 2014 found that China's restrictions violated its WTO accession commitments. China subsequently replaced quotas with a resource tax system, effectively achieving similar outcomes through different mechanisms.

The European Union challenged Indonesia's nickel ore export ban at the WTO in 2019. A panel ruled in November 2022 that the ban violated GATT obligations, but Indonesia appealed to the WTO Appellate Body, which has been non-functional since 2019 due to a U.S. blockade on the appointment of new judges. This paralysis in the WTO dispute resolution system means that there is effectively no enforceable multilateral mechanism to constrain mineral export restrictions, emboldening governments to use them without fear of binding adverse rulings.

Strategic Implications for Importing Nations

The proliferation of export controls has forced importing nations to fundamentally reassess their supply chain strategies. The United States, through the Inflation Reduction Act and the Defense Production Act, is channeling investment into domestic and allied-nation processing capacity. The European Union's Critical Raw Materials Act sets targets for domestic extraction, processing, and recycling to reduce import dependency. Japan, one of the most mineral-import-dependent economies, has invested in stockpiling programs and signed bilateral mineral agreements with Australia, Canada, and several African nations.

For companies and investors, the message from the export control trend is clear: supply chain due diligence must now incorporate geopolitical risk assessment as a core function. Reliance on a single country for any critical processing step is a strategic vulnerability that governments and markets are increasingly unwilling to tolerate. The era of frictionless global mineral trade is over. Understanding the architecture of export controls and their likely evolution is essential for anyone operating in the critical minerals supply chain.