Save for few exceptions, minor metals are produced as by-products during the process of extracting primary, often base, metals. But it is this dynamic between primary and by-product metals, which is at the core of understanding most minor metals markets, that still confounds many analysts, resulting in inaccurate assumptions and misguided conclusions.
In this two-part study, SM Report takes a look at the sometimes complex relationship between primary (or source) metals and by-product (or minor) metals in order to better understand the production and supply of such metals.
As by-products, the supply of most minor metals is heavily dependent on the extraction of source metals and, as a result, the market for the source metal heavily influences the availability of by-product metal. That is because the market for the source metal guides business decisions regarding extraction rates.
But what does this mean? The relationship between gallium and aluminum provides a good example.
Roughly 90 percent of crude gallium currently produced is obtained from aluminum refining. Aluminum miners, such as the Aluminum Corporation of China (Chalco), who supply gallium-rich sodium hydroxide to gallium refiners, do not base their business decisions - most importantly those regarding production rates - on the demand or market price for gallium. Yet, these decisions are critical to the supply equation for the minor metal. Given the naturally limited availability of gallium - and most minor metals - access to raw materials is critical, and small changes to source materials can have a large impact on the supply and demand balance. In other words, it is the aluminum market, particularly the availability and processing of gallium-rich alumina, that has as much bearing on global gallium production as demand for the minor metal.
As SM Report has touched on previously, a lack of transparency in minor metal markets means that timely and accurate production statistics are often difficult to come by. The reasons for this lack of transparency are 
simple. For one, there are a comparatively high number of privately-held companies involved in the production of minor metals. Understandably, these companies have no obligation and little incentive to publish production data. And two, within large, publicly-held metals companies that extract and sell minor metals, such as gallium, germanium, indium, selenium or tellurium, the relatively small proportion of sales that these minor metals account allows producers to avoid publishing production and sales data without coming under undue scrutiny.
Readily available statistics on gallium production, such as those produced by the US Geological Survey are gathered from producer surveys and national import/export statistics. But due to the lack of timely and reliable information on production, country-by-country production capacity statistics are often used as a substitute for actual production statistics.
While production capacity data provides a reasonable approximation of global supply and can be a good starting point for analysis, it offers little to no insight on production trends or risks to supply, and are insufficient for guiding business purchasing decisions or crafting insightful market prognostication. It is no secret that in order to fully understand the economics for any commodity, and in order to produce comprehensive forward-looking analysis, one must understand not only the demand-side of a market, but also the supply-side.
In the case of gallium, this means first understanding the basics of aluminum and gallium extraction.
Gallium is a rare metal that has only become used on a commercial scale in the last 30 years. Over 80 percent of gallium produced is used in the manufacture of semi-conductive substrates, such as gallium-arsenide (GaAs) and gallium nitride (GaN), and light emitting diodes (LEDs).
About 70 percent of global gallium refining is now conducted in China and the world's largest producers of the metal are privately held companies. Roughly 30 percent of production capacity, that which for the most part is located in Europe, North America and Japan, is reliant on sources of recyclable gallium material. The quantity of actual recycled material, it goes without saying, varies depending on market prices and the availability of recyclable materials.
Roughly 90 percent of primary gallium production, that focused mainly in China, but also refined in Korea, Kazakhstan and the Ukraine, is extracted during alumina refining. When bauxite, or alumina ore, high in gallium is treated with sodium hydroxide liquor during the Bayer Process, the gallium is retained in the sodium hydroxide liquor. As the chemical is re-used to treat new batches of crushed ore, the gallium content increases with each batch. Once its gallium content is sufficiently high, the liquor can be treated via solvent extraction and electrolysis to produce a metal that is 99.9-99.99 percent pure, sufficient for most current applications as an input for GaAs and GaCl3.
Continue reading: The Aluminum-Gallium Relationship Part II
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