Fears are growing of a global shortage of rare earth minerals used in the manufacture of high-tech devices as unrest in Myanmar following the February 1 coup disrupts exports to China.
Chinese companies started complaining about delays in shipments of the minerals since mid-March, reportedly due to the deteriorating political and economic situation, which Chinese media reports say have had an impact on logistics.
Rare earth metals are used in aerospace, advanced military equipment, mobile phones and electric vehicles, among other tech products. Myanmar is a major supplier of rare earth ores, which are exported to China for extraction and processing, and then either used in local production or shipped on to global markets.
Hiccups in Myanmar’s supply of rare earths are the latest indicator that the audacious military coup, launched by Senior General Min Aung Hlaing, and subsequent national chaos is starting to seriously disrupt Myanmar’s economy and businesses.
The impact on rare earth shipments is the latest sign the coup is adversely impacting China, which earlier expressed concern about the security of its twin oil and gas pipelines that run through Myanmar into southern China and other commercial interests amid a public backlash against Beijing for its perceived support of the country’s ruling generals.
Several Chinese-owned factories were torched on March 14 in Yangon, prompting authorities to impose martial law in the affected areas.
Myanmar accounts for more than 60% of China’s total ion-absorption rare earth consumption for medium and heavy rare earths. In recent years, China has shifted from a 40% to 60% reliance on Myanmar for its rare earth imports, reportedly due to the environmental damage caused by their extraction domestically.
Chinese rare earth extractive companies said over the weekend to Global Times that Myanmar’s shipments of the minerals have recently dropped, though it wasn’t exactly clear what was causing the disruption in shipments. The report said activities and operations at the mines themselves were running as normal.
The slowed shipments have caused rare-earth oxide prices in the Chinese market to skyrocket, a spike in prices that could soon be transmitted to global markets. According to some estimates, China controls as much as 80% of the world’s rare earth mineral supplies.
Ryan Castilloux, managing director of Adamas Intelligence, a consultancy, told Reuters in February that Myanmar is an “exceptionally critical supplier of feedstocks that are essential ingredients in high-strength permanent magnets for electric vehicle traction motors, wind power generators, industrial robots and a wide array of defense-related applications.”
The manager of a rare earth enterprise in Ganzhou in east China’s Jiangxi province told Global Times, “When the political upheaval erupted in February, rare earth exports to China remained unaffected, as most rare-earth mines are located in the northern part of the country where the situation had been stable but things worsened in recent days.”
Global Times cited an unnamed industry insider as saying China’s rare earth imports from Myanmar might plunge this month with the recent escalation of violence.
Myanmar’s exports of rare earths to China increased by 23% from 2019 to around 35,500 tonnes in 2020, according to Chinese Customs data. China is acutely conscious of the strategic importance of the materials, which some analysts suggest China could withhold in the case of a conflict with the United States.
Indeed, former Chinese leader Deng Xiaoping once said, “the Middle East has oil, China has rare earths.”
China is known to hold the largest reserves of these minerals globally. But due to production quotas to keep prices high and limit damage to the local environment, China now relies heavily on imports from Myanmar.