Beijing has been intensifying the controls of rare earth exports, triggering global shortage and exposing the dependence of Chinese supply chains industries.
However, in recent years, China has depended on rare earth supplies of an unexpected source: the economy relatively small and destroyed by the Myanmar War.
While China is the main world producer of rare earths, raw materials that contain the coveted metals abroad still matter.
Myanmar represented about 57% of China’s total land imports last year, Gracelin Baskaran, director of the critical mineral security program at the Center for Strategic and International Studies, told CNBC.
According to Chinese customs data, Myanmar’s rare exports to China recovered significantly in 2018 and reached a peak of almost 42,000 metric tons by 2023.
Baskaran added that Myanmar imports are also particularly high in the contents of heavy weavy earth elements, which are generally less abundant in the earth’s crust, raising their value and shortage.
“Myanmar’s production has significantly strengthened China’s dominant position, giving Beijing a de facto monopoly on the global heavy earth supply chain, and much of the leverage it exercises today.”
The country has become a key source of two rare and very sought -after earths, the Disposio and the Terbio, which play a crucial role in the manufacture of high technology, even in defense and the military, aerospace and energetically renewable sectors.
“This dynamic has given rise to a supply chain in which the extraction is concentrated in Myanmar, while the downstream processing and the addition of value are carried out predominantly in China,” Baskaran said.
Why Myanmar?
Myanmar is the home of deposits that tend to have a higher rare land content, said David Merriman, director of research of the Blue Project, to CNBC.
These “ionic adsorption clay” or IAC, deposits are exploited through leaching methods that apply chemical reagents to clay, and that comes with high environmental costs.
According to Merriman, the vast majority of the IAC operations in the world were in southern China in early 2010. But, when Beijing began implementing new environmental controls and standards in the rare earth industry, many of these projects began to close.
“Myanmar, particularly the north of the country, was seen as a key region that had a geology similar to many of the IAC deposit areas within China,” said Merriman.
“It began to see a fairly rapid construction of new IAC type mines within Myanmar, essentially replacing Chinese national production. There was a lot of Chinese commercial participation in the development of these new IAC projects.”
The rare earths extracted by these IAC miners in Myanmar are sent to China mainly in the form of “rare earth oxides” for subsequent processing and refining, Yue Wang, a senior rare earth consultant at Wood Mackenzie, told CNBC.
In 2024, a report by Global Witness, a non -profit organization centered on the abuse of environmental and human rights, said that China had effectively outsource much of its extraction of rare earth to Myanmar “at a terrible cost for the environment and local communities.”
Rare risks of China
China’s agency in Myanmar for Rare Earths has also opened it to the risks of the supply chain, experts said.
According to Global Witness’s investigation, most of the heavy Rare Earths of Myanmar originate in the state of northern Kachin, which limits with China. However, after Myanmar’s violent military coup in 2021, the Military Board has struggled to maintain control of the territory amid the opposition of the public and armed groups.
“Myanmar is a risky jurisdiction to trust, given the current civil war. In 2024, the Kachin Independence Army (Kia), a group of armed rebels, seized sites responsible for half of the great production of rare earths of the world,” Baskaran de Csis said.
Since the seizure, there have been reports of supply interruptions that cause peaks in the prices of some heavy rare earths. According to a Reuters report, the KIA was trying to use resources as a lever against Beijing.
Chinese customs data show that imports of rare earth oxides of Myanmar fell more than a third in the first five months of the year compared to the same period last year.
“If Myanmar ceased all exports of rare earth food stocks to China, China would fight to meet its demand for heavy strange earth in the short term,” said Merriman de Project Blue.
It is not surprising that Beijing has been seeking to diversify its sources of heavy rare earths.
According to Merriman, there are IAC deposits in nearby countries, including Malaysia and Laos, where some projects have been established with Chinese participation.
Even so, he points out that environmental standards are expected to be higher in those countries, which will present challenges for rare earth miners.
China’s decision to reduce its own extraction of heavy rare elements can serve as a warning to other countries about the costs of developing such projects. A report by the Chinese media group Caixin in 2022 documented how the old IAC operation sites in southern China had left toxic water and contaminated soil behind, harming the livelihoods of local farmers.
