Although the military coup in Myanmar has not had a significant impact on its metals shipments to top trade partner China, analysts flagged increased uncertainty over the long-term stability of the Southeast Asian country's exports of rare earths and tin amid China's reliance on Myanmarese supply.

Massive protests have swept Myanmar following a military coup on Feb. 1 that saw the arrest of Myanmar's civilian leader, Aung San Suu Kyi, and other senior politicians.

Mining in the country has taken a hit from recent protests as workers joined the movement, Myanmar-focused media outlet The Irrawaddy reported. Operations have stopped at the Sagaing region's two copper projects — Letpadaung and Sabetaung & Kyisintaung, or S&K — which are jointly operated by the military and Chinese company Wanbao Mining Ltd. A spokesperson for Myanmar Yang Tse Copper Ltd, one of Wanbao's two subsidiaries in Myanmar, declined to respond to S&P Global Market Intelligence's telephone inquiry.

Letpadaung Mountain, one of the affected projects, is the largest of its kind in Southeast Asia, according to the report, but the disruption to its operations will not pose any material challenge to global supply due to the country's relatively minor production. However, Myanmar is an important producer of tin and rare earths, and analysts expect the stability of exports to China to be impacted if the situation worsens.

Feedstock availability might tighten

About half of China's heavy rare earths come from Myanmar, but Chinese buyers have not seen any significant decline in shipments from Myanmar since the coup, Hou Jinchen, a rare earths analyst with Shanghai Metals Market, said in an interview. "But certainly the situation in Myanmar has become a concern for market participants," Hou said.

David Merriman, a manager with U.K.-based consultancy Roskill, said the feedstock availability will tighten significantly in Southern China if Myanmar's production were to be disrupted. This was seen in 2019 when China ceased imports of ores and concentrates from Myanmar, which resulted in higher prices for heavy rare earths.

Myanmar's rare earths exports to China have grown significantly over the past few years, according to UN Comtrade data accessed via Panjiva. Myanmar surpassed Malaysia and became the largest supplier of rare earths to China in 2019, with shipments for that year more than doubling over 2018.

"Since many projects remain suspended because of environmental regulation in China, there are few alternative supplies of feedstock domestically," Merriman said.

Tin supply not yet affected much, but hurt by COVID-19

Myanmar’s exports of tin ores and concentrates to China have steadily declined in the past four years, but the Southeast Asian country still accounted for 81% of China’s imports in 2020, according to Chinese customs data. A significant part of tin exports from Myanmar, the world’s third-largest producer of the metal, went to China and Thailand in recent years, the UN Comtrade data showed.

Shanghai Metals Market senior analyst Wu Xiaofeng said imports from the Wa county in the autonomous Shan state of Myanmar, which produces more than 80% of the country’s tin concentrate and supplies most of the Chinese imports, were not affected much by the recent coup. The biggest impact might be seen on shipments entering China from Ruili port, a major land port along the China-Myanmar border that is used mainly for shipments from regions outside of Wa county. However, the monthly shipments via Ruili are only close to 500 tonnes, Wu said.

The International Tin Association also noted in a February report that the Wa region is "relatively isolated from the political situation in the rest of the country," and expected February imports into China to remain relatively steady at 3,200 tonnes.

Production from Wa county might pick up amid higher tin prices, but shipments to China will only increase if the pandemic situation improves there, Wu said. Last month, tin prices hit multiple-year highs after rising steadily from lows in March 2020 amid supply issues, low inventories and strong demand for electronics.

James Willoughby, a market analyst at the International Tin Association, said mines in the now-military-controlled areas of Myanmar have been able to continue production as normal. Production from Wa is thought to have increased in the last month as higher tin prices have made it economic to mine lower-grade ores, Willoughby told S&P Global Market Intelligence.

Guo Ning, a manager at Antaike, the research arm of the China Nonferrous Metals Association, said tin shipments from Myanmar to China have largely slowed since the start of the COVID-19 pandemic, and the issue has not yet improved. Last year, Myanmarese tin exports to China dropped 22%, data from China Customs showed.

"Supply in China is quite tight at this moment. Recently we have seen some smelters in China cut their production because of the tight supply of raw materials. … Any material impact on Myanmar production will increase the tightness," Guo added.

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Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.