How a war-torn Myanmar plays a critical role in China's rare earth dominance

China's grip on the rare earth market is tightening, but the country's reliance on imports from Myanmar, a nation grappling with political turmoil, is becoming increasingly significant. As the world's leading producer of rare earth elements, China has also turned to Myanmar to supplement its needs, with the Southeast Asian country contributing approximately 57% of China's total rare earth imports last year, according to Gracelin Baskaran from the Center for Strategic and International Studies. The surge in Myanmar's rare earth exports to China began around 2018, peaking at almost 42,000 metric tons by 2023. These imports are particularly valuable due to their high concentration of heavy rare earth elements, which are rare in the earth's crust and crucial for advanced technologies. Baskaran noted that Myanmar's burgeoning production has effectively solidified China's monopoly over the global supply chain for these essential materials, giving Beijing substantial leverage. Among the sought-after heavy rare earths are dysprosium and terbium, which are integral to various high-tech applications, including defense, aerospace, and renewable energy sectors. The extraction process in Myanmar focuses on ionic adsorption clay (IAC) deposits, known for their rich heavy rare earth content. However, the methods employed often come with severe environmental repercussions. David Merriman from Project Blue highlighted that many IAC operations previously located in China migrated to Myanmar as stricter environmental regulations came into play in China. The rare earths mined in Myanmar are predominantly shipped to China as rare earth oxides for further processing. However, a report from Global Witness warned that this outsourcing of extraction has dire consequences for the environment and local communities. Furthermore, the ongoing civil unrest in Myanmar poses substantial risks to China's supply chain. With the Kachin Independence Army recently seizing control of key production sites, there are fears that supply disruptions could lead to significant price increases. Chinese customs data indicates a notable decline in rare earth oxide imports from Myanmar in early 2024, raising alarms about China's vulnerability if the conflict continues. Experts suggest that if Myanmar were to halt exports entirely, China would face considerable challenges in satisfying its demand for heavy rare earths in the near term. In response to these uncertainties, China is actively seeking alternative sources for heavy rare earths in neighboring countries like Malaysia and Laos. However, higher environmental standards in these regions may complicate future mining endeavors. The situation serves as a cautionary tale about the potential risks associated with developing rare earth projects, particularly in light of the environmental devastation left in the wake of prior operations in China.