- The Kachin Independence Army (KIA) rebel group recently took control of the REE-rich towns of Panwa and Chipwe, previously held by the Border Guard Forces group, which is closely aligned with the military government.
- Small-scale REE mines are often illegally operated by Chinese businessmen in collaboration with local authorities. There are reports of lacking labor and environmental standards. Small trading companies export REE to China.
- Sinolytics estimates that Kachin State supplies approximately 20 percent of China’s REE consumption, mainly delivered in the form of oxides. These are particularly rare and valuable heavy REE.
- China is critically dependent on REE imports from Myanmar. As REE consumption from electric vehicles, wind and other applications is quickly growing, China can no longer rely on its domestic deposits to satisfy demand.
- Myanmar’s former civilian government restricted REE mining, and trade continued to decline during the Covid period. However, exports rose to a new record in 2023 as the military government again promoted REE exports to China.
- The current battles could disrupt mining activities in Kachin state and exports to China. This could, for instance, affect the supply of dysprosium for permanent magnets and erbium for optical applications.
- However, it seems possible that KIA will be open to continuing to export REE, as it has done in areas it previously dominated.
- However, China would risk relations with the Myanmar government if it tolerates trade with KIA. One solution could be to increase REE imports from Lao PDR.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.