Highlights
- Armed insurgents in Myanmar have seized control of a key rare earth mining hub near the Chinese border, potentially disrupting supplies to China.
- The ongoing civil war in Myanmar has seen resistance forces gaining momentum, controlling over half the country’s territory and threatening the military junta’s power.
- This conflict could significantly impact the global rare earth market, as Myanmar has become a major supplier to China, exporting 41,700 tons valued at $1.4 billion in 2023.
An armed insurgency against Myanmar's military currently running the southeast Asian nation has apparently seized control of a mining hub, a material supplier of rare earth oxides to China. This action associated with the ongoing struggle may disrupt shipments of elements utilized by the Chinese. In this nation rare earth mining activity is in Kachin state adjacent to Panwa and Chipwi, near the Chinese border.
What’s going on?
The civil war in Myanmar is ongoing, with the resistance forces gaining momentum and the junta struggling to maintain control. The resistance includes pro-democracy forces and ethnic militias. The resistance now controls more than half of Myanmar's territory. The resistance forces are diverse but lack critical coordination.
The junta, also known as the military, is struggling to resupply troops with food, water, ammunition, and medical supplies. The junta is only retaining control over big cities in the heartland, and even there, they are getting threatened.
Also developing are a series of unfolding events, actions and dynamics. For example, the UWSA, Myanmar's largest rebel group, has quietly gained strength without having to fight. The Karenni Nationalities Defence Force (opens in a new tab) (KNDF) has taken control of parts of the large towns ofLoikaw and Demoso.
In the meantime, the military is desperate to try to fill its strength and has used a construction law for the first time in history.
The military is much smaller than commonly thought, with about 150,000 personnel and 70,000 combat soldiers.
According to media reports military defections across the country in recent months have indicated that morale is collapsing, and this could of course favor the ragtag rebels.
Background
Back in February 2021 Myanmar’s Army chief Gen. Min Aung Hlaing (opens in a new tab) organized the overthrow of the democratically elected government of Aung San Suu Kyi (opens in a new tab). Her National League of Democracy beat back the military-backed political party just months prior during nationalelections.
The civilian ledparty had beat the military multiple times.
Thus, the nation’s armed forces (called Tatmadaw) claimed without any substantive evidence that the National League of Democracy was guilty of committing electoral fraud. The military arrested Suu Kyi on multiple charges. The leader and core supporters were placed under house arrest.
Enter the nation-wide civil disobedience movement in response to the coup. This has turned into a movement, part of a civil war, despite countless crackdowns from the military and related security apparatus.
With tens of thousands of people arrested, the United Nations estimates (opens in a new tab) over 5,000 civilians killed. Also, the junta is known to be torturing people to death when they are arrested and held.
In April 2021, mostly in exile, members of the National League of Democracy — with representatives of Myanmar complex ethnic patchwork — established the National Unity Government of Myanmar. A report by PBS (opens in a new tab) earlier this year cites a significant surge in civilian deaths.
Unfolding Dynamics
According to a Reuters report Oct 19, the Kachin Independence Army (opens in a new tab) (KIA) seized control of Panwa according to a Colonel, Naw Bu, stating that they had previously captured Chipwi. Both Reuters and Thai media were not able to independently verify the status of both towns.
The rebel Colonel said that the KIA is focused on managing the town of Panwa and has no current plans for rare earths or other economic issues, Naw Bu said.
The Bangkok Post and Reuters report that in previous rebel advancements into earth mining areas in Kachin state were under the control of militia group NDA-K, which is allied with Myanmar's junta government and welcomed payments from Chinese companies looking to establish mines.
"Rebel control of these mining sites could potentially disrupt rare earth concentrate shipments into China, which have declined for four months straight owing to the monsoon season and other challenges," research firm Adamas Intelligence (opens in a new tab) said in a note on Tuesday.
Context: China and Myanmar Trade
Myanmar has become a significant source of rare earth minerals for China. In recent years, Myanmar's exports of rare earths to China have surged dramatically, with the amount doubling between 2021 and 2023. In 2023, Myanmar exported 41,700 tons of rare earth minerals to China, valued at approximately $1.4 billion.
This volume of exports is more than double China's own domestic rare earth mining output. Rare earths are crucial for various technologies, including electric vehicle batteries and renewable energy infrastructure.
However, this extraction has had severe environmental and health impacts, particularly in northern Myanmar's Kachin State, where much of the mining is unregulated. Toxic chemicals used in the mining process, such as ammonium sulfate, have led to widespread pollution, affecting both ecosystems and local communities. Thus, questioning the sustainability of this dynamic.
How does all of this impact rare earth markets?
Myanmar supplied China with about 50,000 metric tons of rare earth oxides (REOs) from ion-adsorption clays (IACs), surpassing China's domestic IAC mining quota of 19,000 tons and in the process establishing status as top exporter of heavy REOs, reports Ord Minnett (opens in a new tab), a financial advisor with various research arms.
China is the world's biggest consumer and importer of rare earth ores and compounds, which that nation, the world’s second largest economy as measured by gross domestic product, uses to produce refined rare earth and magnets, industries it dominates.
Matthew Hope (opens in a new tab), a mining analyst with Ord Minnett informed that last month China actually stopped rare earth imports of ammonium sulphate used to leach rare earths there due to the conflict.”
"I expect the KIA plans to resume the REO business provided China is prepared to accept the exports and supply the technicians and ammonium sulphate. But I reckon it will expect payments before letting the companies do so," Hope said, a quote picked up by both Reuters and the Bangkok Post (opens in a new tab). "Once the conflict passes, we expect financial deals with Chinese miners will be renegotiated, likely delaying restarts until early-2025," he said, adding that prices for REOs used in magnets are likely to rise as supply tightens.
Daniel
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