How a war-torn Myanmar plays a critical role in China's rare earth dominance

Beijing has been stepping up controls connected uncommon world exports, triggering planetary shortages and exposing industries' dependence connected Chinese proviso chains. 

However, implicit caller years, China itself has go reliant connected uncommon world supplies from an unexpected source: the comparatively tiny and war-torn system of Myanmar. 

While China is the world's apical shaper of uncommon earths, it inactive imports earthy materials containing the coveted metals from abroad.

Myanmar accounted for astir 57% of China's full uncommon world imports past year, Gracelin Baskaran, manager of the Critical Minerals Security Program astatine the Center for Strategic and International Studies, told CNBC.

According to Chinese Customs data, Myanmar's uncommon world exports to China importantly picked up successful 2018 and reached a highest of astir 42,000 metric tons by 2023.

Baskaran added that the imports from Myanmar are besides peculiarly precocious successful dense uncommon world constituent contents, which are mostly little abundant successful the earth's crust, elevating their worth and scarcity. 

"Myanmar's accumulation has importantly strengthened China's ascendant position, efficaciously giving Beijing a de facto monopoly implicit the planetary dense uncommon earths proviso concatenation — and overmuch of the leverage it wields today." 

The state has go a cardinal root of 2 highly sought-after dense uncommon earths, dysprosium and terbium, that play important roles successful high-tech manufacturing, including successful defence and military, aerospace and renewables sector.

"This dynamic has fixed emergence to a proviso concatenation successful which extraction is concentrated successful Myanmar, portion downstream processing and worth summation are predominantly carried retired successful China," said Baskaran.

Myanmar is location to deposits that thin to person higher dense uncommon world content, David Merriman, probe manager astatine Project Blue, told CNBC. 

These "ionic adsorption clay" oregon IAC deposits are exploited done leaching methods that use chemic reagents to the clay — and that comes with precocious biology costs. 

According to Merriman, the immense bulk of the world's IAC operations were successful Southern China successful the aboriginal to mid-2010s. But, arsenic Beijing began implementing caller environmental controls and standards successful the uncommon earths industry, a batch of these projects began to adjacent down.

"Myanmar, peculiarly the North of the country, was seen arsenic a cardinal portion which had akin geology to galore of the IAC deposit areas wrong China," Merriman said. 

"You started to spot rather a accelerated physique retired of caller IAC benignant mines wrong Myanmar, fundamentally replacing the home Chinese production. There was a batch of Chinese concern engagement successful the improvement of these caller IAC projects."

The uncommon earths extracted by these IAC miners successful Myanmar are past shipped to China mostly successful the signifier of "rare world oxides" for further processing and refining, Yue Wang, a elder advisor of uncommon earths astatine Wood Mackenzie, told CNBC.

China's reliance connected Myanmar for uncommon earths has besides opened it up to proviso concatenation risks, experts said. 

According to Global Witness's research, astir of the dense uncommon earths from Myanmar originate from the Northern Kachin State, which borders China. However, pursuing Myanmar's convulsive subject coup successful 2021, the subject junta has struggled to support power of the territory amid absorption from the nationalist and equipped groups.

"Myanmar is simply a risky jurisdiction to trust on, fixed the ongoing Civil War. In 2024, the Kachin Independence Army (KIA), a radical of equipped rebels, seized sites liable for fractional the world's dense uncommon earths production," said CSIS' Baskaran. 

Since the seizure, determination person been reports of proviso disruptions causing spikes successful the prices of immoderate dense uncommon earths. According a Reuters report, the KIA was seeking to usage the resources arsenic leverage against Beijing. 

Chinese customs information shows, imports of uncommon world oxides from Myanmar fell by implicit a 3rd successful the archetypal 5 months of the twelvemonth compared to the aforesaid play past year.

"If Myanmar were to cease each exports of uncommon world provender stocks to China, China would conflict to conscionable its request for dense uncommon earths successful the abbreviated term," said Project Blue's Merriman. 

Not surprisingly, Beijing has been looking to diversify its sources of dense uncommon earths.  

According to Merriman, determination are IAC deposits successful adjacent countries, including Malaysia and Laos, wherever immoderate projects person been acceptable up with Chinese involvement.

Still, helium notes that biology standards are expected to beryllium higher successful those countries, which volition contiguous challenges for uncommon world miners. 

China's determination to chopped backmost connected its ain extraction of dense uncommon world elements whitethorn service arsenic a informing to different countries astir the costs of processing specified projects. A report by Chinese media radical Caixin successful 2022 documented however erstwhile IAC cognition sites successful Southern China had near down toxic h2o and contaminated soil, hurting section farmers' livelihoods.