Over the years, refineries and processing facilities in China have developed expanded capacities and production targets that rely on imported material to supplement domestic primary production. With much of this material sourced from countries with unregulated mining activities and intermittent production, it is unclear whether sufficient imported feedstock supply can be maintained. 

Recently, concerns have been raised regarding the reliability of tin and rare earth element (REE) feedstock from Myanmar, a country that has formed a significant trade relationship with China. Notably, Myanmar was the third-largest tin ore and concentrate producer and fourth-largest REE concentrate producer globally in 2022. Most tin mining operations occur close to the Myanmar–China border in Special Zone 2, which is governed by the United Wa State Party (UWSP), while most REE mining operations occur close to the Pang War–Tengchong border crossing with China in the Kachin State, which is controlled by the Kachin Independence Organisation (KIO). The UWSP, although recognising the sovereignty of the central government over Myanmar, is an autonomous self-governing polity, whereas the KIO is independent of the Myanmar government. In addition, Thailand imports minor amounts of tin ore and concentrate from the southern region of the country rather than from the Wa State.

As a result of the proximity of these critical resources to China, the vast majority is transported over the border for further processing and refining. While most tin concentrate sourced from Myanmar is processed in Yunnan Province, China, it should be noted that REEs sourced from Myanmar are far more difficult to trace. This is a result of the multiple REE processing facilities throughout China that often combine raw materials from diverse sources.

Supply chain fragility

The resilience of all global supply chains was tested during the pandemic. During this period, the trade of both tin and REEs from Myanmar to China was negatively impacted by major border port closures, notably at the Menglian, Diantan, and Menglong ports, resulting from China’s zero-COVID policy, exposing the existing fragility of this supply network.

Mining activity suspensions in 2023

Tin mining suspension

In an effort to preserve resources, Myanmar's Wa State Central Economic Planning Committee revealed a detailed plan, originally released on 15 April 2023, to suspend all tin mining and processing activities in the Wa State from 1 August 2023. This suspension is significant as tin ore and concentrate exports from the Wa State represented the majority of all tin ore and concentrate exports from Myanmar in 2022.

All mines and processing plants, regardless of size, ceased production on 1 August 2023, with the majority of local workers temporarily dismissed and ore transport vehicles prohibited from operation to prevent any raw ore transportation.

A document released by the Wa State Central Economic Planning Committee on 21 August 2023 shed further light on the situation, informing mine owners that they had until 30 August 2023 to gain approval and secure a permit for mineral processing operations from the Central Affairs Committee, with a 30% tax in kind applied to the processing of ores. In addition, the document stated that all mineral rights regarding unmined ores and those extracted after 1 August 2023 have now been transferred to the Central Economic Planning Committee, while mine owners will retain backdated rights only to tin ores brought to the surface before 1 August 2023. However, the duration required for the approval of operations and the subsequent resumption of tin mining and processing activities remains uncertain, and no further notices have been released.

Chinese imports of tin concentrate to Yunnan Province, particularly from the Wa State, spiked significantly in July, increasing by approximately 35% year-on-year, according to Chinese trade data, prior to the implementation of the suspension. High refined tin stocks on both the London and Shanghai markets, coupled with weak demand from the global electronics sector and strong output from African and Australian producers, have resulted in the market remaining largely balanced, with refiners adequately compensating for the abovementioned mining and processing suspension. Although the impact on Chinese producers in the near term has been limited, refined tin production in Yunnan Province has recently restarted, and the duration of the suspension in Myanmar is still unclear, leading to uncertainty regarding how long the market will remain in balance.

Rare earth elements mining suspension

Similarly, in April 2023, the KIO announced the suspension of REE mining in Kachin State from 4 September 2023, as protests highlighted environmental damage from mining and processing. Despite this, Chinese companies were permitted to gradually halt production in line with necessary steps rather than coming to an abrupt halt. Pressure has been building to comprehensively monitor mining operations in the region following environmental concerns, with the local government announcing inspections of REE mining operations in September 2023 that were expected to last only ten days, equating to one to three weeks of supply. However, after random inspections across more than 300 mining sites, the extended suspension has led to the temporary dismissal of local workers and uncertainty surrounding the resumption of operations as no new notices have been released by authorities.

Chinese imports of REE material spiked significantly in August, increasing by approximately 76% year-on-year, according to Chinese trade data, prior to the implementation of the suspension. Stockpiling of REE material ahead of peak consumption was further driven by environmental inspections that took place in late August in Jiangxi Province, a major REE production hub. In early 2022, REE manufacturers in Ganzhou, Jiangxi Province, suffered production capacity reductions of at least 25% after border gates between Myanmar and China were shut down at the beginning of the year, illustrating the significance of the current suspension.

While reserves should be sufficient for up to three to six months, any extended suspension of REE mining in Kachin State could be damaging for refineries in China reliant upon feedstock from Myanmar. The government-guided price for REEs in China has remained relatively low to incentivise downstream production, as magnet producers have found it increasingly difficult to pass additional costs to downstream end-users, though this has caused poor performance for upstream operators.

Impacts and consequences of over-reliance

With supply chain networks only recently recovered and reestablished in 2023, the most recent disruption to the trade of tin and REEs from Myanmar to China has been significant. This has led to China potentially pivoting to more reliable and less volatile sources of material with high enough availability to replenish social inventories and avoid undersupply to domestic refineries. However, it should be noted that both the UWSP and KIO earn significant revenue from mining, indicating that a prolonged suspension of mining activities would be detrimental, especially as it would result in importers seeking alternative supply.

In addition, Myanmar is the newest significant source of mined antimony, with production ramping up rapidly enough for it to become the fourth-largest global producer in 2022. While antimony in the country is extracted partly through Chinese-owned companies, it should be noted that Myanmar has invested in refined capacity to maximise revenues through downstream processing. This has led to a more diverse export portfolio as European countries are able to access an alternative to refined material of Chinese origin.

Although China has begun diversifying its supply chain portfolios in recent years, pivoting to rely more on imports of REE material and tin ore and concentrate from Laos and central Africa, respectively, it remains to be seen whether the country has established a relationship of excessive dependence on Myanmar. As production at existing operations around the world ramps up in line with expanding global refinery capacity, global economic activity, geopolitical risk, and supply chain transparency will play increasing roles in disruptions to feedstock supply and the ability of producers to avoid potential backlash from international consumers.