Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: In the Jungles of northern me and Maar, close to
Speaker 2: the border with China, a town called Pungwah sits in
Speaker 2: a small valley. It's surrounded by forested peaks that are
Speaker 2: sometimes dusted with snow. But against this scenic backdrop, a
Speaker 2: sprawling industrial operation is transforming the hilltops.
Speaker 1: So you have these hills, these very dramatic hill slopes,
Speaker 1: with these pools kind of midway up the hill. So
Speaker 1: there's like kind of a lattice work of pipes that's
Speaker 1: laid over boreholes. So yeah, it is sort of industrial
Speaker 1: and dystopian, but also set in a very remarkable, very
Speaker 1: beautiful part of the world.
Speaker 2: Timothy McLaughlin is a journalist and a freelance contributor for
Speaker 2: Bloomberg based in Singapore. He says Pungwa and the surrounding
Speaker 2: region of Kachin State have come into the spotlight lately
Speaker 2: because a ground there is rich with precious metals rare
Speaker 2: earths that are in high demand right now.
Speaker 1: Meanmar is hugely significant in the rare earth's industry. It
Speaker 1: is the third largest producer of rare earths globally, behind
Speaker 1: the US of China.
Speaker 2: These rare earth elements are worth billions of dollars. They're
Speaker 2: key components in your iPhone, your electric vehicles, and even
Speaker 2: missiles used by the US military. And Me and Mar
Speaker 2: isn't just any producer of rare earth. It's a crucial
Speaker 2: supplier to China, accounting for more than half of the
Speaker 2: country's total imports last year. But the region around Pungwa
Speaker 2: has been disrupted by a long running conflict between me
Speaker 2: and Maar's military junta and a rebel group, the Kachin
Speaker 2: Independence Army or KIA.
Speaker 1: The current Hunter took power in twenty twenty one, and
Speaker 1: it has been a very tumultuous, bloody period for the
Speaker 1: country for the past couple of years. It's important to
Speaker 1: understand that Memr already had a large number of armed
Speaker 1: groups who were fighting the central military primarily for greater
Speaker 1: autonomy for their ethnic groups, and so the past four
Speaker 1: years has seen a massive surge in fighting. You know,
Speaker 1: the military has been able to hang on to most
Speaker 1: of the middle of the country, but their control over
Speaker 1: the periphery of the country and the borderlands has suffered
Speaker 1: quite a bit.
Speaker 2: Hungwah is part of that embattled region. The Kia took
Speaker 2: control of the area late last year and that's created
Speaker 2: a headache for China.
Speaker 1: So they take over to these mines by the Kia
Speaker 1: a huge complicating factor for Beijing and came at a
Speaker 1: really inopportune time because where it's became this big global
Speaker 1: trade issue kind of rate as the KA took over
Speaker 1: these mines, and so Beijing and Chinese companies are now
Speaker 1: buying rare earths from them, so funding them. But then
Speaker 1: they are also supporting the memr military of the junta,
Speaker 1: so they are on both sides of this fight.
Speaker 2: This is the Big Take Asia from Bloomberg News. I'm wanh.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons and
Speaker 2: businesses that drive this ever shifting region. Today on the show,
Speaker 2: how a rebel army in me and Mar became a
Speaker 2: major player in the rare earth's industry and what its
Speaker 2: new dominance means for China next door and for global
Speaker 2: supply chains. Despite the name, rare earths are really not
Speaker 2: that rare. They can be found all over the world,
Speaker 2: but they're almost never found on their own in nature.
Speaker 2: The minerals are mixed in with other elements in the
Speaker 2: ground and often at low concentrations, and that makes mining
Speaker 2: them a complex process. In me and Mar, rare earths
Speaker 2: are usually extracted from the soil.
Speaker 1: On hillsides, so you have these very dramatic hill slopes
Speaker 1: with these collection pools that are sort of at the
Speaker 1: bottom midway up the hill. The collection pools they're lined
Speaker 1: with tarps, so the water tends to have this kind
Speaker 1: of turquoise color to it.
Speaker 2: And to get these rare earth elements into these vast
Speaker 2: collection pools, a process called n C two leaching comes in.
Speaker 1: It's sort of like an IV drip for a hillside.
Speaker 1: You're dripping this leaching agent into the hillside. So there's
Speaker 1: like kind of a lattice work of pipes that's laid
Speaker 1: over boreholes and then there's little taps and so this
Speaker 1: is just going down into the ground and then later
Speaker 1: towards the bottom of the hill washed out and what
Speaker 1: comes out at the bottom is this mixture of rare
Speaker 1: earth water leaching agent that's collected in large pools sort
Speaker 1: of like concrete industrial swimming pools, and the rare earth
Speaker 1: sludge settles at the bottom. The water is drained off,
Speaker 1: and that sludge is then baked in these big furnaces
Speaker 1: that look like massive pizza ovens, and the resulting product
Speaker 1: is are rare a docksides.
Speaker 2: When demand for these metals began to take off in
Speaker 2: the mid two thousands, China was by far the biggest
Speaker 2: miner of rare earths. It accounted for nearly all of
Speaker 2: the world's mind rare earth supply and was also the
Speaker 2: biggest refiner. But around twenty ten, China began shutting down
Speaker 2: many of its small scale mines.
Speaker 1: China started to see the environmental impact it was having.
Speaker 1: Pumping millions of liters of this fluid into the ground
Speaker 1: had enormous ecological impact, especially of watersheds and river weys.
Speaker 2: The wastewater that's full of chemicals and toxins is typically
Speaker 2: directed right back into the nearest river. It can contaminate
Speaker 2: the soil and the waterways downstream and cause landslides. A
Speaker 2: lot of the mines that China shut down were located
Speaker 2: in the country's southwest along the frontier with Miunmar, and
Speaker 2: as the industry shut down in China, the mine operation
Speaker 2: looked just across the border. To get back to business.
Speaker 1: You can see that on the ground level when you
Speaker 1: know Chinese miners arriving, but eventually you can start to
Speaker 1: see it from space because the mines start to get dug,
Speaker 1: the pools start to fill up. You can also see
Speaker 1: the road network getting built, and the road network kind
Speaker 1: of goes not that far. It goes from China into
Speaker 1: these mines and then the trucks kind of go back out.
Speaker 2: A geospatial analysis found that in just about seven years,
Speaker 2: hundreds of new mining sites have sprung up in the
Speaker 2: area where Pungwa is located. China became the biggest buyer
Speaker 2: of me and Mars rare earth. It imported more than
Speaker 2: eight hundred million dollars by twenty twenty one. That's eight
Speaker 2: hundred times what it bought just a decade ago.
Speaker 1: They have large deposits of two specific elements which are
Speaker 1: turbum and dysprosia, and they are important to making rare
Speaker 1: earth magnets, and these magnets are now found in a
Speaker 1: lot of electric vehicles, five trains, wind turbines, guided missile systems,
Speaker 1: and these two elements are added to magnets to enhance
Speaker 1: their capabilities to make them able to work at higher temperatures.
Speaker 1: Without losing the magnetism that they have. And so right
Speaker 1: now these magnets are a huge point of contention between
Speaker 1: the US and China. While these magnets are coming from
Speaker 1: China because that's where they are made, the elements that
Speaker 1: are going into them are coming from Vnmar in many cases.
Speaker 2: And what kind of impact then, are we seeing of
Speaker 2: this mining boom on the environment and on local communities.
Speaker 1: You're seeing people and other groups realize that there is
Speaker 1: a huge amount of money, huge amount of demand. We're
Speaker 1: going to see these minds expand probably outside of Kitchen
Speaker 1: State to places that are controlled by other groups who
Speaker 1: think that they have similar geology and they can also
Speaker 1: kind of cash in on this rare gold rush at
Speaker 1: the moment, but I think the environmental impact is probably
Speaker 1: the most pronounced right now. All you're seeing the rivers
Speaker 1: and streams that are very important to the way of
Speaker 1: life for small villages and cities and towns at this
Speaker 1: part of the world getting totally ruined. And it is
Speaker 1: also becoming a cross border issue because these watersheds run
Speaker 1: through Southeast Asia and so some of this stuff is
Speaker 1: now flowing into Thailand, and so you see the Thai
Speaker 1: government tie civil society becoming concerned about this. There's also
Speaker 1: concerns about the structure of the mines, the safety you
Speaker 1: could imagine, pumping millions of gallons of liquid into the
Speaker 1: side of a hill makes it inherently unstable. Often people
Speaker 1: are getting trapped in tunnels or killed by landslides. So yes, overall,
Speaker 1: environmentally and labor regulations wise, very much sort of the
Speaker 1: Wild West at the moment.
Speaker 2: And while mining companies have been tearing up the ground
Speaker 2: in search of rare earth minerals, the region around the
Speaker 2: mines is being torn by a bloody conflict between the
Speaker 2: government and rebel groups. After the break, the crucial supply
Speaker 2: of rare earths in the hands of a rebel army
Speaker 2: the risks for China and the world. For years, the
Speaker 2: town of Pongwa in northern me and Maar was under
Speaker 2: the control of a warlord allied with the country's military junta.
Speaker 2: The rare earth's minds in the region were operated by
Speaker 2: Chinese companies, and the shipments of the precious metals ran
Speaker 2: like clockwork. Reporter Tim McLaughlin says that Chinese government generally
Speaker 2: sees me and Mar's military regime as a stabilizing force
Speaker 2: along its border.
Speaker 1: Beijing's greatest fears that the country would splinter apart and
Speaker 1: there would be some sort of Syria type situation right
Speaker 1: on a huge border that they have, And so they
Speaker 1: sat on the fence for a while, and then when
Speaker 1: they saw the MEMR military started to struggle last year
Speaker 1: and maybe losing some key strategic outposts, they really kind
Speaker 1: of came off the fence and threw their port behind
Speaker 1: the ME and R military. Not because I think there's
Speaker 1: any deep love there. I think it's because they really
Speaker 1: fear the country just crumbling, and they think much like
Speaker 1: the BOMR military does, that they are kind of the
Speaker 1: glue holding this all together.
Speaker 2: But that changed late last year when the KA, the
Speaker 2: armed ethnic group battling the military junta, advanced on Pungwa.
Speaker 1: The Kitschin Independence Army is fighting a larger, decades long
Speaker 1: struggle against the VNMR military for greater autonomy for the
Speaker 1: Kitchen ethnic people. Late last year, the KIA started fighting
Speaker 1: their way towards this point, looking to capture not just Pangwa,
Speaker 1: but capture all of Kitchen Special Region one and kind
Speaker 1: of take it as their own.
Speaker 2: The KIA took control of Pungwa along with hundreds of
Speaker 2: valuable rare earth minds overnight. That made the rebel army
Speaker 2: one of the largest players in the rare earth industry.
Speaker 2: But Tim says this change of control in Pangwa has
Speaker 2: put China in a difficult position. It's bordered with me
Speaker 2: and Mar is long, so it needs to secure the
Speaker 2: cooperation of the military junta, but it also needs the
Speaker 2: rare earths that are now controlled by the rebels.
Speaker 1: The KA is complicated because they are fighting the Vnmar
Speaker 1: junta and so Beijing and Chinese companies are now buying
Speaker 1: rare earths from them, so funding them. But then they
Speaker 1: are also supporting the Menmar military of the junta, so
Speaker 1: they are on both sides of this fight, and they
Speaker 1: have voiced their displeasure to the Kia. They've also closed
Speaker 1: the border on occasion to try to sort of force
Speaker 1: their hand. So we did see the mining shut down
Speaker 1: and saw the border close for a long time. It
Speaker 1: is since reopened because we could see the exports going
Speaker 1: out of VMMR into China now, so you know, an
Speaker 1: agreement of some sort between these companies between the Kia
Speaker 1: between China has been reached for now, but like many
Speaker 1: things in Nmar, at the moment, how long it will last,
Speaker 1: how steady it is, is in open question.
Speaker 2: By purchasing the rare earth's mind in Me and Mar,
Speaker 2: China is effectively funding the Kia, perhaps a military huntes
Speaker 2: greatest and most long standing enemy. This puts China in
Speaker 2: a pickle, and that's why it's now looking for other
Speaker 2: suppliers of these in demand elements.
Speaker 1: You'll see much more coming from Laos. You'll see mining
Speaker 1: startup in parts of Bandmar where Beijing has better relations
Speaker 1: with the armed groups that have closer relations to Beijing,
Speaker 1: and so the big official Chinese companies could go in
Speaker 1: and operate. You're not relying on this kind of ragtag
Speaker 1: middleman to kind of do this stuff.
Speaker 2: As China tries to find other places beyond Me and
Speaker 2: Mar for rare earths, the US is also scrambling to
Speaker 2: find its own alternative to China. In July, a rare
Speaker 2: earth mine opened in Wyoming, the first in the US
Speaker 2: in more than seventy years. At the same time, the
Speaker 2: US is also tentatively eyeing Me and Mar.
Speaker 1: For rare earths. There's been some interest from State Department
Speaker 1: and other groups about kind of sussing out and getting
Speaker 1: a feel for the current situation and what it's like
Speaker 1: on the ground. Right now, the US has very limited
Speaker 1: engagement with Meanmar, MEANMR is massively unstable at the moment.
Speaker 1: You know, you have the hunta fighting armed ethnic groups,
Speaker 1: you have them fighting smaller pro democracy groups that popped
Speaker 1: up Dow for the coup. The Hunt is starting plans
Speaker 1: for an election, which I think could be very destabilizing.
Speaker 1: And then of course you see the military running a
Speaker 1: really horrific campaign against its own citizens.
Speaker 2: And Tim says there are more than just political and
Speaker 2: humanitarian considerations for the US to factor.
Speaker 1: There's just really, really really huge logistical issues. I mean,
Speaker 1: it would take moving tons of rare earth material from
Speaker 1: a sort of undeveloped, far remote corner of the kind,
Speaker 1: and then you'd have to move it across the country
Speaker 1: that's covered with hundreds of warring ethnic groups and armed
Speaker 1: groups to a point of exit. Then the question is, well,
Speaker 1: where do you bring it to refine it? And the
Speaker 1: answer to that question is you bring it to China,
Speaker 1: because China is the only place that has the capability
Speaker 1: to refine this stuff. So now we're back where we started,
Speaker 1: right and that is assuming that Beijing would allow this.
Speaker 1: Why would China allow any US firms or companies or
Speaker 1: linked people come into their own backyard and take what
Speaker 1: they have obviously deemed a national security asset from them.
Speaker 1: So there's a myriad of issues. There's obviously been the
Speaker 1: sort of moral issues of the country and dealing with
Speaker 1: various militaries, but just the logistics and geopolitics of it
Speaker 1: alone make it sound almost inconceivable.
Speaker 2: And now you've got this rebel army added to the
Speaker 2: geopolitical mix. It's such a wild card.
Speaker 1: Yeah, I mean, I don't think there's another situation that
Speaker 1: ever reached the geopolitical tension that we're seeing now between
Speaker 1: the US and China with rarersts in the middle. And
Speaker 1: so you have these big superpowers and these big tech
Speaker 1: companies and huge investments, and then when you drill down
Speaker 1: one of the key players here is this group that
Speaker 1: really was born out of a anti colonial struggle against
Speaker 1: the BMR government. And then I think the other thing
Speaker 1: kind of wildcard here is technology in the advancements. Maybe
Speaker 1: rare earth magnets will be innovative out of existence. Do
Speaker 1: you already see some companies touting that they're running their
Speaker 1: ev motors with batteries that don't have rare earths in them.
Speaker 1: Maybe we're not talking about of them in the same way,
Speaker 1: whether it's in ten years or fifteen or twenty years.
Speaker 1: So there's also this other kind of unknown as the
Speaker 1: kind of where this whole industry goes.
Speaker 2: This is The Big Take Asia from Bloomberg News. I'm wanha.
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