Myanmar coup: Impact on China's rare earth ore imports

SHANGHAI, Feb 9 (SMM)—The Myanmar military announced on February 1 that it would take over the regime and declared a one-year state of emergency, and said that Min Aung Hlaing, the commander-in-chief of the armed forces will take power. The leader of Myanmar Aung San Suu Kyi, the President of Myanmar Win Min and other senior government leaders were arrested in a raid launched in the early hours of February 1, local time, and claimed that the arrest of officials of the ruling party was "a response to fraud in the legislative election last November."

From the perspective of trade structure, China mainly exports complete sets of equipment and products such as electromechanical equipment, textile, chemical, metal and vehicle accessories to Myanmar, while Myanmar mainly exports minerals, agricultural products, timber, aquatic products, jewelry and other products to China. In terms of minerals, Myanmar is China's largest import source of mixed rare earth carbonates and unlisted rare earth oxides. The incident has aroused the attention of the industry.

Myanmar's rare earth mines are mainly distributed in Panwa, Myitkyina and other regions. They enter China mainly from Tengchong and Ruili ports. The import companies are mainly China's six largest rare earth groups. According to customs data, China's imports of mixed rare earth carbonate totalled 8,714.1 mt in 2020, of which the imported mixed rare earth carbonate from Myanmar stood at 6,225.2 mt, accounting for 71%.

According to UCSG statistics, China’s rare earth mine (equivalent to oxide) output in 2018 stood at 120,000 mt, while Myanmar’s rare earth mine output came in at 5,000 mt, ranking fourth in the world, and Australia and US were ranked second and third respectively.

Tengchong Customs officially closed on May 15 2019, banning all rare earth business-related commodities from importing and exporting. Mixed rare earth carbonate from Myanmar to China fell to zero in June, July and August 2019. Data showed that Myanmar provided 50% of China's medium and heavy rare earth raw materials in 2018. The amount of heavy rare earth compounds shipped from Myanmar to China in 2018 accounted for more than 16% of the global rare earth oxide (REO) equivalent supply, but the border closure led the supply to decrease 28.7% year on year.

The Myanmar military stated that after the end of the national emergency, the country will re-elect and transfer state power to the newly elected party. During the implementation of the national emergency, the Federal Election Commission will be reformed to re-check the general election process last November. At the same time, measures will continue to be taken to deal with the pandemic and promote economic recovery.

"All executive power, legislative power, and judicial power belong to the headquarters of the Myanmar National Defense Forces. Myanmar is now under military rule again. Myanmar may amend the constitution at least in the next year. " said Xu Liping, a researcher at the Institute of Asia-Pacific and Global Strategies of the Chinese Academy of Social Sciences. Xu also emphasized that the military's actions may also lead to stricter domestic control measures, which will affect the construction and operation of the project. "The alternation of power will also hinder the procedures for project approval.

At the same time, large-scale demonstrations or violent conflicts may break out in Myanmar, which will affect economic development and social stability. In addition, it cannot be ruled out that Western countries impose economic sanctions on Myanmar, which will inevitably worsen the investment environment, and suppress the progress of the project. "

Many experts in the rare earth industry believe that this incident has little impact on rare earth imports in the near term. However, if Myanmar mine imports are blocked, prices of medium and heavy rare earths may rise. SMM analysts will follow up on the impact of this incident on rare earth imports.