By David Whitehouse
The increasing prominence of Myanmar as a supplier of the rare earths, crucial elements for a global transition to electric vehicles, leaves the world in urgent need of alternative supplies and processing capacity.
Rare earths, the global supply and processing of which has historically been dominated by China, are needed for batteries for electric cars, wind turbines, as well as for fibre optics and other applications. China has been increasingly outsourcing the supply of rare earths across the border to Myanmar. According to commodity research firm Roskill, Chinese state-owned enterprises have become reliant on sources in Myanmar, especially for the non-light category of rare earths, and have few alternatives.
Roskill has estimated that between 2016 and 2019, about 16,000 people moved from Ganzhou in China to Myanmar to mine rare earths. In recent years, the campaigning group Global Witness says, Kachin Special Region 1 in the country’s mountainous northeast has become the world’s largest source of supply. China imported over $200 million worth of rare earths from Myanmar in December 2021 alone, Global Witness says.
That poses a dilemma for the West as it seeks to achieve a transition to electric vehicles while taking account of environmental, social, and governance (ESG) concerns. The Myanmar junta overthrew the democratically elected government led by Aung San Suu Kyi in February 2021. United Nations-appointed independent human rights expert Tom Andrews said in September that 1.3 million people have been displaced since the coup, and that the military is committing war crimes daily.
The people of Myanmar are “deeply disappointed” by the response of the international community and by states are “working to prop up this illegal and brutal military junta with funding, trade, weapons, and a veneer of legitimacy,” Andrews said. Myanmar’s democratically elected government-in-exile, meanwhile, has declared rare earth mining in the country illegal. “There is a high risk that revenues from rare earth mining are being used to fund the military’s abuses against civilians,” Global Witness says.
Reliance on Myanmar and China is a “serious problem,” says Luisa Moreno, managing director of Tahuti Global, a Canada-based consultancy which advises governments on critical materials. Deposits of rare earths are not scarce, but many of those which exist are not economic to exploit, Moreno says. In contrast to minerals such as gold or copper, where standard practices are used for retrieval, an individual recovery method has to be devised each time for rare earths, she adds.
China, as Moreno notes, has not to date provoked any major disruptions in rare earths supply. She suspects that will continue as it is China’s economic interests to supply rare earths and other critical materials such as lithium and graphite to the world. Still, there may be dangers in relying on a benign scenario. “If China invades Taiwan we would be in a different situation,” Moreno says. An invasion would “completely and utterly disrupt the green transition.”
There is a “significant reliance” upon rare earth materials sourced from China and Myanmar, says David Merriman, research director for metals and mining at Wood Mackenzie in London. China and Myanmar account for roughly 70% of global mine production in 2022, and 87% of refined production. China is also the main recycling centre for rare earth magnet materials, accounting for more than 95% of magnet scrap recycling globally, he says. Involvement of Chinese state-owned companies in the rare earth industry means that the industry is “strongly politicised, particularly in the international market,” he adds.
The current production of rare earths is “far less concentrated in China today than it was 10 years ago, and is likely to become less concentrated in future,” says Jon Hykawy, president at Stormcrow Capital Research in Ontario, Canada. He points to the fact that there are producing mines in Australia and the United States. Lynas’s Mount Weld mine in Australia makes 6,000-7,000 tonnes of neodymium and praseodymium oxide per year. About two or three more such mines would be enough to ensure that every light-duty vehicle on earth contains an electric motor, he says. “That doesn’t seem impossible given there are dozens of prospective projects.”
The main problem, he says, is the “impact that strong demand growth might have on prices. The biggest problem is not getting the rare earths. The biggest problem for end-users is keeping the prices in a predictable band.”
Hykawy argues that the easiest way to extract rare earths, without any need to find any new supplies, is to process monazite, a waste product from the current mining of heavy mineral sands. But to create an independent supply chain, “we need a way to compete with China” in separating and purifying the rare earths. In China, this is done by a solvent extraction process, but replicating that in North America, with its much higher labour and capital costs, is “likely not the perfect formula. So we need something different.”
One attractive option, Hykawy says, is the RapidSX approach, developed by Canadian rare earth company Ucore Rare Metals. RapidSX is a solvent extraction approach which uses the same chemicals as regular rare earth solvent extraction, but with much lower capital and operating costs. “That’s the sort of diversification we can use in the western world.”
Such solutions, however, will take time to achieve scale and do not resolve immediate ESG dilemmas. The cost of rare earth extraction rises as attempts are made to minimise the environmental impact. The Chinese government has estimated that the cost of repairing damage including polluted waterways in southern Jiangxi Province may be about $5.5 billion.
In 2016 China introduced new rules to clean up the industry and closed many domestic mines, but the environmental impact is simply being exported to Myanmar. Foreign investment in small- and medium-scale mineral production is against the law in Myanmar, so Chinese-backed mining is occurring illegally. Global Witness says that heavy rare earth mining has been devastating for the country’s environment with few if any safeguards in place. Investors in rare earth industries, Global Witness argues, should make public reporting on sourcing a requirement of investment, and use their financial leverage to dissuade companies from sourcing heavy rare earths from Myanmar. Current market prices for dysprosium and terbium are “artificially low” and as new mining projects are developed elsewhere, the costs of environmental safeguards, including processes for treating waste, must be included, the report says.
Geographical diversification of the market will be critical to ensuring original equipment manufacturers in North America and Europe reduce their supply chain risks, Merriman says.
Even if all goes well, developing new projects takes several years, so “investment and financing is required now to avoid supply deficits towards 2030. All stages of the supply chain must be developed and supported simultaneously, otherwise most supply chains will have to pass through China at some point.”
Moreno is “optimistic” that rare earth production can be increased, but notes that output will need to double over the next 10 years to meet projected electric vehicle demand alone. China can’t meet rapidly expanding global demand by itself, she says. The European Union and the UK, Moreno says, talk about developing new partnerships with potential producers, for example in Africa, but should have been doing so 10 years ago. More exploration and better processing capacity are both required, she says. “We need to take on the responsibility to build our own supply chains.”
David Whitehouse is a freelance journalist in Paris.
Author: David Whitehouse