When camouflage-clad, rifle-carrying rebels from the Kachin Independence Army (KIA) led an offensive to seize the northern town of Pangwa near the Myanmar-China border last October, few recognised the international implications.
It marked the latest escalation in a seven-decade-long civil conflict between Myanmar’s brutal military regime and hundreds of armed groups like the KIA, rooted in the resource-rich provinces spanning China, Thailand, India and Myanmar.
More significantly, the KIA’s offensive consolidated its control over Kachin State, home to nearly all of Myanmar’s rare earth mines – and nearly half of the world’s supply of the heavy rare earths used in magnets for car motors, electric vehicles (EVs), wind turbines, semiconductors and defence technology.
Over the following months, high-ranking politicians and business executives in Beijing, Washington and boardrooms across Europe sat up and took notice. Ford Motors’ CEO Jim Farley said in June that the auto giant had been forced to close one of its plants due to the rare earth shortage. Days later, executives from Toyota and General Motors told the White House their suppliers faced acute shortages that could shut production lines.
Even as KIA spokesperson Colonel Naw Bu said the rebel group had policies in place to continue rare earth mining and negotiate with businessmen, the KIA raised taxes on miners and stifled production of dysprosium and terbium, sending the price of the latter skyrocketing.
The KIA does not have the capability to process the rare earth elements (REEs) mined under its supervision. For that, Myanmar needs China to process the elements into magnets that power EVs and wind turbines around the world. Instead, China has closed trading posts between the two countries.
Soon after seizing Pangwa, the KIA turned to Bhamo, another strategically vital town in Kachin State where rebels and the military junta continue to wrestle for control.
Beijing’s response was to threaten to halt buying the REEs mined in the territory. In July, Reuters reported that Chinese foreign ministry officials issued an ultimatum to the KIA: abandon the offensive into Bhamo and Beijing would establish cross-border trade, or else face full economic isolation.
Such a move would be a significant blow to Myanmar’s already bleak economic outlook, amid a ‘polycrisis’ of intensifying conflict, natural disasters and deepening poverty. It could also inflict wider turmoil on global heavy REE supply chains.
Not only does China hold the largest reserves of rare earths in the world, estimated at some 44 million tonnes, the country also processes nearly 90% of global REEs, according to GlobalData’s Global Rare Earths Mining Review, published in January.
“The cessation of imports could jeopardise not only global supply chains but also the stability of China’s domestic industries,” Isabel Al-Dhahir, principal analyst at GlobalData, tells Mining Technology. “Considering the historic scale of imports from the Kachin State, China’s threat of stopping purchases of REEs from KIA-controlled territories is an intriguing negotiation tactic.”
The significance of Myanmar’s civil war and China’s looming presence will be felt hardest in heavy rare earths, according to the International Energy Agency (IEA).
“Today, China and Myanmar together account for around two-thirds of global mined supply of heavy rare earths”, an IEA spokesperson tells Mining Technology. “[But] China represents around 90% of global refined heavy rare earths supply.”
While the China-Myanmar border remains strictly controlled, a gradual flow of existing inventories to China restarted in March.
Despite China’s inventories of raw materials at refining plants, which come from domestic mines and imports from Laos and Brazil, there are likely to be shortages for heavy rare earth feedstocks at Chinese processors if the border conflict continues, according to the IEA’s Global Critical Minerals Outlook.
“Therefore, if the conflict in Myanmar continues, it could lead to a price increase for the medium and heavy rare earths, while the impact on light rare earths would be relatively limited,” the IEA’s report predicts.
In many ways, the China-KIA saga is a microcosm of Beijing’s willingness to wield its dominance over the processing and refinement stages of the REE supply chain to further its geopolitical aims on the global stage.
However, while pulling the plug on trade can leave beleaguered economies like Myanmar’s on the brink of collapse, does China have the same leverage over multi-trillion-dollar economies like the US?
The prevalence of REEs across numerous key industries indicates that Beijing’s leverage remains impactfully high, above all on the auto industry. As China and the US continue to verbally and economically spar, REE supply has become an ever more sought-after bargaining chip, as seen with the previous economic conflict around mining exports between Australia and China.
Reciprocal tariffs were Beijing’s go-to response when US President Trump imposed universal tariffs on his so-called ‘Liberation Day’ (2 April), which included a total of 54% total tariffs on Chinese goods.
China’s President Xi Jinping retaliated with a 34% tariff on all US imports on 4 April. On the same day, China’s Ministry of Commerce announced it would require companies to apply for a licence before exporting seven types of rare earths: dysprosium, gadolinium, lutetium, samarium, scandium, terbium and yttrium.
Xi Jinping, President of the People’s Republic of China. Credit: Photo Agency/Shutterstock.
Both nations spent the following week escalating tariffs tit-for-tat, with the US raising tariffs to 104%, then 145%, and China to 84%, then 125%.
It took until 12 May for Chinese and US officials to agree a temporary reduction in reciprocal tariffs – but the Trump administration would later reveal that China did not ease restrictions on REE exports, which was supposedly part of the deal.
On 26 June, Trump announced that the US and China had signed an agreement on trade, although he did not mention any specifics. US Commerce Secretary Howard Lutnick told Bloomberg that “they are going to deliver rare earths to us”, adding that the US would “take down our countermeasures” once Beijing did.
“The sporadic nature of Trump’s trade policies and resulting retaliations adds an extra layer of uncertainty to US manufacturers, with some planning month to month,” Al-Dhahir says. “The restrictions could incentivise the US to expand its domestic production of REEs.”
Domestic REE reserves are a chink in the US’ geopolitical armour when compared to China.
Currently, the only operational mine in the US is Mountain Pass in California. Its production has been “steadily expanding to account for approximately 15% of global rare earth mining”, Al-Dhahir adds.
Companies not traditionally active in the mining industry have identified this potential and begun investing.
In July, Apple announced a $500m investment in MP Materials, the Las Vegas-headquartered REE company that owns and operates the Mountain Pass mine. This investment will secure the fabrication of US-made rare earth magnets from MP Materials’ factory in Fort Worth, Texas, as well as the development of a rare earth recycling facility in Mountain Pass.
MP Materials’ expansion of its Fort Worth factory (pictured) will supply recycled rare earth magnets for hundreds of millions of Apple devices. Credit: MP Materials.
While deals like the MP Materials-Apple partnership bolster the US’ REE supplies, China’s dominance looks set to remain undisputed – and Beijing’s geopolitical sword-brandishing is likely to continue, with Myanmar and the KIA the latest in the line of fire.
“The prevalence of REEs across so many industries makes them indispensable. Rare earths therefore constitute a significant component of China’s geopolitical toolkit,” Al-Dhahir concludes. “The country’s emphasis on REEs can be traced back to the 1980s when the then-President Deng Xiaoping likened the importance of rare earths to China to the significance of oil to the Middle East.”
It seems unlikely that China’s current president, Xi Jinping, will play anything but hardball with Myanmar, the US, or any other geopolitical entity as he seeks to quash the unrest and capitalise on the importance of REEs over the decade to come.
“China’s Trump card: using rare earth elements as geopolitical bargaining chips” was originally created and published by Mining Technology, a GlobalData owned brand.
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