Rare earths in spotlight amid US-China tensions, Myanmar turmoil

Rare earth prices are expected to consolidate recent gains as disruptions in Myanmar curb supplies, and as Beijing could ramp up export restrictions amid uncertainty surrounding trade tensions with the United States after its presidential election on Tuesday, according to analysts.

Following recent supply disruptions in Myanmar, Chinese state-owned rare earth giant China Northern Rare Earth (Group) High-Tech announced list price increases, prompting share price gains for the sector.

An armed rebel group has taken over a mining centre in Myanmar as part of a more than three-year-old civil war, Reuters reported on October 23. Chinese media outlets say mining operations in the Southeast Asian nation have effectively been suspended.

China imported 31,000 tonnes of rare earth oxide from Myanmar for domestic processing in the first nine months of this year, customs data showed.

Meanwhile, analysts expect that Beijing could use export controls if it gets further enmeshed in trade disputes with the US or EU, as China controls 90 per cent of the world’s rare earth processing capacity backed by 60 per cent of global production.

“As it’s an important, though relatively small, part of China’s trade with the West, this sector could be a retaliatory tool for China in the event we see aggressive tariff action ramp up, or a sweetener to achieve a deal down the line,” said Lynn Song, Greater China chief economist with ING.