Companies caught out by China's decision to restrict exports of two metals widely used in semiconductors and electric vehicles were racing to secure supplies on Tuesday as some industry suppliers worried that curbs on rare earth exports could follow.

Monday's abrupt announcement of controls from August 1 on exports of some gallium and germanium products has ramped up a trade war with the United States and could potentially cause more disruption to global supply chains.

Analysts saw the move, which the Ministry of Commerce said was to protect national security, as a response to escalating efforts by Washington to curb China's technological advances.

"China has hit the American trade restrictions where it hurts," said Peter Arkell, chairman of the Global Mining Association of China.

The announcement came just before US Secretary of Treasury Janet Yellen visits Beijing.

Paul Triolo, senior vice president for China at strategy firm Albright Stonebridge, said the restrictions are likely to target companies in the semiconductor and defense industry, and it could help China gain more bargaining power.

"It's clearly timed to send a not-so-subtle message to the Biden administration that China holds significant cards when it comes to inputs to the semiconductor, aerospace, and automobile industries, and can and will increasingly be willing to inflict pain on US companies," said Triolo.

The European Commission expressed concern, while Germany's Economy Minister Robert Habeck said any broadening of controls to materials like lithium would be "problematic".

The Dutch government said the effect of the new rules would depend on how they are carried out.

One US semiconductor wafer manufacturer said on Tuesday it was applying for export permits, while a China-based germanium producer said buyer enquiries had come in as prices surged.

The eight gallium and six germanium products cited are also used in other high-tech industries.

Some in the metals industry said they feared China could follow with new restrictions on rare earth exports, after curbing shipments 12 years ago in a dispute with Japan. China is the world's biggest producer of rare earths, a group of metals used in EVs and military equipment.

"Gallium and germanium are just a couple of the minor metals that are so important for the range of tech products and China is the dominant producer of most of these metals," Arkell said. "It is a fantasy to suggest that another country can replace China in the short or even medium term."

China produces most of the world's gallium and germanium.

In 2022, top importers of China's gallium products were Japan, Germany and the Netherlands, news website Caixin said, citing customs data. Top importers of germanium products were Japan, France, Germany and the United States, it said.

The commerce ministry will meet with major producers of the metals on Thursday to discuss the export restrictions, four people familiar with the matter told Reuters.

In a sign of the potential for new production outside China, Nyrstar said it would look at germanium and gallium projects in Australia, Europe and the United States. (Reuters)