The US and China rivalry, if anything else, is certainly over the extraction, production and distribution of critical minerals. These minerals, as rare as they are to be found, are equally difficult to mine and process. The new age technology is heavily dependent on them. From telecommunications devices & equipment to automobiles, it is almost certain that the new age technology lacks alternatives. Therefore, it is no surprise countries are scavenging for deposits of rare earth minerals.
The demand for rare earth minerals is going to increase as traditional industries give way to new age technology. For now, China is well ahead of the rest of the world in controlling the share of rare earth minerals leaving behind the highly advanced industrial countries of Europe.
In a retaliatory move to Trump’s tariff threats in April, China tightened the noose on the rare earth mineral supply. According to the International Energy Agency (IEA), China produces 61 percent of the globally mined rare earth minerals and dominates 92 percent of the world’s production output. The announcement on export controls on the seven rare earth elements by China sore prices, disrupted the supply chain, and put the critical industries on the standstill. With its virtual monopoly, China possesses the potential to weaponize the rare earths.
China’s rare earth industry is controlled by five state owned enterprises. Among them, China Southern Rare Earth Group is the biggest with 40 percent officially sanctioned quota of mining. According to Chinese customs figures, China Southern Rare Earth imports 70 percent of the rare earth compounds from Myanmar.
Myanmar has been under the military regime since the coup in February 2021. With a firm backing from China the regime keeps itself afloat amidst frequent clashes with the EAOs and pro-democracy forces. Since the coup, according to Amnesty International, the military junta has killed more than 6,000 people, detained more than 20,000, and more than 3.5 million people are internally displaced. It has lost control of more than 50 percent of the territory. Several strategic locations and the regime’s previous stronghold are captured by the rebel forces making it desperate to use indiscriminate power to regain ground before it loses total control.
China’s leverage in Myanmar
Meanwhile, China is able to exert its influence on the military regime and the rebels. And perhaps the only country with such a leverage in Myanmar. With no other player in the country as influential as it is, Myanmar has become a virtual colony of China with a monopoly on resource exploitation. Myanmar has abundant reserves of jade, timber, oil, gas and deposits of rare earth compounds.
With sanctions in place, Myanmar is cut from the western world. According to the OEC, with a GDP of USD 66.8 billion, Myanmar ranks 86 out of 195 countries. It exports goods worth USD 21.8 billion. Petroleum gas accounts for USD 3.3 billion followed by rare earth metal compounds worth USD 1.44 billion making it the world’s largest exporter of the rare earth metal compounds. Its major trading partners are China and Thailand accounting for 50 percent of trade.
However, the economy grew by just 1 percent till 25 March suggesting the civil unrest is taking its toll on the health of the overall economy. When democracy returned in 2011 the economy did fairly well, in fact with 6 percent average growth per year Myanmar was one of the fastest growing economies in the world. But optimism did not last long. The military, by dismissing the elected government and assuming the power to itself let the economy and the political opportunity nosedive.
According to the ISP Report, Myanmar has exported more than USD 4 billion to China between 2017 and 2024 and became the primary external source for rare earth minerals. Since the coup the number of mining sites have increased at a rate of 194.4 percent. And nearly 84 percent of the exports have come post the 2021 coup indicating the surge in legal and illegal mining activity involving both military and Ethnic Armed Organisation (EAO) backed entities. Two-thirds of China’s rare earth minerals imports in the same period came from Myanmar signifying its dependence on Myanmar to keep its processing plants running throughout.
Since the 1980s China has controlled the global rare earth sector. According to the US Geological Survey’s report on rare earth elements, China, with 44 MT (million metric tons) is home to nearly half of the world’s total known reserves and also is the world’s leading rare earth producer, producing 270,000 MT. Owing to mismanagement and recklessness of domestic rare earth extraction and processing industries led to closing many mining sites and processing plants in 2015 and 2016.
Jiangxi province in eastern China, known as “rare earth kingdom” now faces stricter compliance and regulations thereby placing constraints on the supply of locally extracted rare earth minerals to the processing plants. Ganzhou Rare Earth Group, a parent company of China Southern Rare Earth Group leads “the way in opening up the path of importing rare earth resources from Southeast Asian countries such as Myanmar”, and has seized more than 50 percent of the overseas rare earth resources and imported 10,000 tons of rare earth compounds, after the clamp down.
Since then, Northern Myanmar’s Kachin State has become an attractive option for extracting primarily two Heavy Rare Earth Elements (HREEs)- Dysprosium (DY) and Terbium (Tb). Rare earth elements are a group of 17 elements generally categorized into two groups based on atomic weights– Light Rare Earth Elements (LREE) and Heavy Rare Earth Elements (HREE). Among them HREEs are rare and more valuable, therefore more expensive. These are primarily used in the advanced technology products such as in defense, aerospace and green industries. Their most important use is in the production of permanent magnets, which are essentials for motors and generators for electric vehicles and wind turbines.
Since the operations moved to Myanmar and Yunnan from Ganzhou in eastern China to keep up with the domestic and global demands, Myanmar exported 35tpy (tons per year ) from less than 5000 tpy in 2016. 50 percent of the HREEs output from China were sourced from Myanmar. The Chinese state owned enterprises are heavily dependent on the Myanmarese sources. The sites at Chipwi and Pangwa townships, which are militia controlled, have seen a surge in extraction pits and in-situ leaching collection pits.
Nearly half of the world’s supply of the heavy rare earths is extracted in Kachin state and north of Bhamo– a strategically important town bordering China in control of the Myanmar military. Since the beginning of the year, the battle for the control of Bhamo has intensified. The mining towns in the north are controlled by the rebels and advancing down south threatening the regime controlled town. Since the region is important for the rare earths and China depends on it heavily, it cannot afford to see the disruption in the extraction activities due to the fighting. China conveyed it to the Kachin Independence Army (KIA)— controls the mining sites, to stop fighting the military or it would stop importing the rare earths and close the border. However, the recent dip in exports and extraction activities indicate China is willing to side the military junta for a long term benefit.
