Filling the Scandium Vacuum Left by China Export Restrictions

• Sunrise Energy Metals is developing the world's first primary scandium mine in New South Wales, Australia, positioned to replace 100% of China's current production with a single project
• China imposed export restrictions on scandium in April 2025, declaring it a dual-use military material, effectively cutting off Western access to 85% of global refined scandium supply and 100% of metallized scandium
• Scandium serves 3 key markets - semiconductor RF filtering chips (enabling 5G technology), aluminum alloys for aerospace/defense, and solid oxide fuel cells, with demand expected to grow from 50-60 tons annually to potentially hundreds of tons by decade's end
• The company is targeting feasibility study completion by end-September 2025, with an estimated capital cost around $100 million USD and 18-month construction timeline to address urgent Western supply security needs
• The project aligns with US Department of Defense priorities for critical mineral stockpiling and weapons development, with potential for various government financing mechanisms including price floors and strategic partnerships

As global supply chains face increasing geopolitical pressures, critical minerals have emerged as flashpoints in the competition between major powers. Among these materials, scandium occupies a unique position - despite being one of the world's smallest traded metal markets at just 50-60 tons annually, it plays an outsized role in advanced technologies ranging from 5G semiconductors to military aerospace applications. Sam Riggall, CEO of Sunrise Energy Metals (ASX:SRL), is positioning his company to capitalize on what he describes as an unprecedented supply crisis following China's recent export restrictions on this strategic material.

The China Supply Shock

In April 2025, China fundamentally altered the global scandium landscape by imposing export restrictions on the metal, classifying it as a dual-use item with both civilian and military applications. This move has effectively severed Western access to what Riggall describes as 

"About 85% of the world's supply of refined chemical scandium and 100% of the world's metallized scandium which is the form in which the chip industry needs the metal."

The implications extend far beyond simple supply disruption. Even if China were to reopen export channels, the regulatory framework appears designed to be prohibitive for Western defense contractors. As Riggall explains: 

"If you're supplying the US Department of Defense, there is absolutely no way you can comply with any of these regulations China is imposing on you as a customer. They're going to have to provide details about the final products that the scandium is going into, the compositions and specs of the alloy that are going to be used, who are their traders that they use, which bonded warehouses do they hit from China all the way through to the final product."

This regulatory maze creates what Riggall characterizes as "inherent limitations that Chinese supply will never be able to service in western markets going forward," fundamentally reshaping the strategic calculus for Western manufacturers and defense contractors.

Market Dynamics and Applications

Despite its small absolute size, the scandium market serves critical high-value applications where the metal's unique properties command premium pricing. The largest current consumer, the United States, utilizes scandium primarily in three sectors, each with distinct growth trajectories and strategic importance.

In the fuel cell sector, Bloom Energy represents the dominant consumer, using scandium in solid oxide fuel cells where the metal enables operation at lower temperatures, extending cell life and reducing degradation. Riggall notes that 

"Bloom looks as though in the next 5 years we'll be building as many fuel cells over that period as they've built in the last 10 to 15 years." 

It is driven partly by demand for off-grid power solutions supporting AI infrastructure development. The semiconductor application, while newer, carries perhaps the greatest strategic significance. Scandium-based chips enable radio frequency filtering that made the transition from 3G to 5G possible. 

"That transition from 3G to 5G has been made possible solely by Scandium, the best scandium-containing technology has been proven to work up to 20 plus GHz."

The aluminum alloy market presents the largest potential volume opportunity. When alloyed with aluminum, scandium provides exceptional strengthening properties - "every .1% by weight of scandium added to aluminum basically adds about 50 MPa of yield strength to that alloy" - while also improving corrosion resistance, weldability, and extrudability. This makes it particularly valuable for aerospace applications where weight reduction and structural integrity are paramount.

The Primary Production Advantage

Sunrise Energy Metals' project represents a fundamental departure from the historical scandium supply model, which has relied entirely on byproduct recovery from other mining operations or waste stream processing. This byproduct dependence has created what Riggall describes as a persistent "chicken and egg problem" where potential customers want to adopt scandium-enhanced products but cannot secure reliable supply commitments for scale production.

The geological advantage of Sunrise's deposit is substantial. While Chinese producers extract scandium at concentrations of "about 10 to 20 parts per million out of its waste streams," Sunrise's "head grade into the mill will be about 6 to 700 ppm" - representing roughly a 70-fold concentration advantage. This grade differential, combined with primary production economics, positions the project to compete effectively even against subsidized Chinese production.

"When you look at primary mine supply, particularly high concentration, you cannot find a lower cost point than what you will get out of the ground in central New South Wales. It is geologically unique. It's extremely high grade."

Interview with Sam Riggall, CEO of Sunrise Energy Metals

Operational Framework

The proposed operation represents a relatively modest physical footprint with substantial strategic impact. The facility will process approximately 65,000 tons of ore annually through a hydrometallurgical circuit featuring a small autoclave - "about 30th the size" of typical nickel laterite operations. The technical approach builds on established mining processes, with Riggall noting that "there's nothing technologically unique or untested in this flowsheet."

The project's scale belies its potential market impact. At a planned capacity of 40-50 tons annually, Sunrise could theoretically "replace 100% of China's production out of New South Wales today for a very very low capital outlay." The facility is designed with expansion capability to scale production to hundreds of tons if market demand develops, leveraging what Riggall describes as "efficient capital outlay" for capacity additions.

Product specification flexibility represents another competitive advantage. While the market has historically traded primarily in scandium oxide due to fuel cell demand, semiconductor applications require metallized scandium. Sunrise plans to produce oxide domestically while developing metalizing capability, likely in the United States, to serve the expanding chip market.

Financial Structure & Government Support

The project's financing strategy reflects both the challenges and opportunities inherent in critical mineral development. With estimated capital requirements around $100 million USD (based on 2016 estimates of $75 million escalated for inflation), Sunrise faces the typical challenge of securing debt financing for a small, specialized metal market.

However, the strategic importance of scandium is attracting government attention that could provide alternative financing mechanisms. Riggall notes that scandium appears on Department of Defense lists "for stockpiling" and "for weapons development alloys" and "for semiconductor technologies for memory chips." This recognition opens possibilities for various support mechanisms including price floors, strategic partnerships, and export credit agency backing.

"When government money leans in, usually export credit agencies lean in shortly after," Riggall observes, referencing the recent MP Materials deal as an example of how government strategic investment can catalyze private sector participation.

Market Outlook

The scandium market sits at an inflection point where geopolitical supply disruption coincides with expanding technological demand. Current market size of 50-60 tons annually could reach "100 tons of demand by the end of this decade" through simple extrapolation of historical growth, but Riggall sees potential for much larger expansion if supply security enables broader adoption.

"If we can break this chicken egg problem and encourage adoption, we can see quite easily a few hundred tons of demand by the end of this decade or early next decade." 

It is driven primarily by aluminum alloy applications where aerospace and defense contractors currently limit scandium use due to Chinese supply dependence.

The competitive landscape favors early movers given the specialized knowledge and customer relationships required. However, success depends critically on customer commitment, as Riggall emphasizes: 

"Unless I have customers who say to me, we are absolutely committed to building an alternative to Chinese supply chains and we will support you for the first 5 years of operation and this is how we intend to support you, there's no point building the mine unless I have that sort of assurance from customers."

The Investment Thesis for Sunrise Energy Metals

• Strategic Timing: China's April 2025 export restrictions have created immediate supply crisis for Western scandium consumers, with no alternative primary sources currently available
• Geological Advantage: World-class deposit with 600-700 ppm scandium grades compared to Chinese waste stream recovery at 10-20 ppm, providing substantial cost advantage
• Market Replacement Scale: Single project can replace 100% of current Chinese production (40-50 tons annually) with expansion potential to hundreds of tons
• Technology Enabler: Scandium is essential for 5G/6G RF filtering chips, advanced aerospace alloys, and next-generation fuel cells - markets experiencing rapid growth
• Government Alignment: Project directly addresses US Department of Defense critical mineral priorities, enabling potential government financing support and strategic partnerships
• First-Mover Advantage: Primary production model solves historical supply reliability issues that have constrained market adoption and customer scaling
• Low Capital Intensity: Estimated $100 million development cost for project capable of serving entire Western market demand
• Defensive Positioning: Creates Western supply chain independence for materials essential to military and civilian technology infrastructure
• Scalability: Designed for rapid, low-cost expansion if demand growth materializes from aluminum alloy adoption
• Revenue Visibility: High-value, specialized market with limited competition and customers prioritizing supply security over cost optimization

The scandium opportunity exemplifies the broader critical minerals investment theme driven by great power competition and supply chain resilience priorities. As Western governments recognize their vulnerabilities in strategic material supply chains, small but essential markets like scandium become focal points for policy intervention and investment support. 

The semiconductor industry's reliance on scandium for 5G technology, combined with defense applications in aerospace alloys, positions this metal at the intersection of economic competitiveness and national security. China's decision to weaponize scandium exports through dual-use regulations reflects a broader pattern of using resource dominance as geopolitical leverage, creating structural demand for Western alternative supply sources regardless of cost considerations. 

The AI infrastructure buildout further accelerates demand through fuel cell applications for off-grid data center power, while 6G development promises even greater semiconductor requirements. This convergence of technological advancement, geopolitical tension, and supply constraint creates what Riggall characterizes as a unique value creation opportunity.

"We could with this one mine replace 100% of China's production out of New South Wales today for a very very low capital outlay. That's the opportunity."