China’s fraying ties to Myanmar’s tin hub threaten key supply

Bloomberg News | October 30, 2023 |

Yangon, the largest city in Myanmar (Stock Image)

Ties between China and a powerful Myanmar armed group that controls a key source of tin are fraying, threatening to prolong what have already been months of supply disruption for the key metal.


China has long had a warm relationship with the group that rules the self-proclaimed Wa state in the country’s north, an inaccessible corner known as a hub for illegal narcotics trade — but links have been tested by the Wa decision earlier this year to suspend mining, cutting off nearly a third of China’s total tin ore supply.

Tensions have now been exacerbated by Beijing’s efforts to shut down cyber-scam operations in the border region, a flourishing enterprise that funds organized crime and often targets Chinese nationals. Beijing’s crackdown has targeted United Wa State Army officials it says are ringleaders. Xinhua recently reported more than 2,300 suspects have been captured in Myanmar as part of a broader crackdown and escorted across the border.

“We anticipate that prices will edge higher in 2024 as the seaborne tin market starts to see a fall in supplies as the mining ban of Myanmar rolls on and export ban of Indonesia comes into effect,” BMI, a unit of Fitch Group, said in a note earlier this month.

The Chinese crackdown might delay moves by the Wa state and the ruling Pao family to review mining rules to allow operations to resume, according to five tin traders and industry executives, who declined to be identified as they aren’t allowed to speak to the media. They had anticipated mining would restart this year, but expectations have now been pushed out until the first quarter of 2024.

Semiconductor demand

Some Wa state ore processors — which turn the raw material into concentrate — have resumed working, the people said. But they are operating at low efficiency because of insufficient stockpiles.

That might create short-term supply disruption as demand from the semiconductor industry — which uses tin in electronic circuits — improves.

Tin is not yet in crisis: inventories are rising in London Metal Exchange warehouses. But supply has already faced repeated blows this year from protests in Peru and expectations that Indonesia, the world’s largest exporter, will ban overseas sales as part of its campaign to develop processing capacity for metals at home.

Since the discovery of large deposits in Wa State, Myanmar has become a crucial tin producer, and a driver of the benchmark price on the LME. That has handed considerable power to the UWSA. the largest ethnic armed group in a nation in the throes of civil war since the military seized power in a coup in 2021.

The tin ban earlier this year sent prices 12% higher to their strongest level in nine months. Prices jumped again in August when Wa began enforcing an exploration and extraction halt. At that point, almost two-thirds of China’s imports of tin-in-concentrate were coming from Myanmar, with Wa accounting for some 70% of that.

(By Alfred Cang and Philip J. Heijmans)