The global supply of heavy rare earths—minerals essential for electric vehicles and wind turbines—is dependent on the outcome of a months-long battle in the hills of northern Myanmar, where China has intervened with an ultimatum aimed at a rebel army.
Since December, the Kachin Independence Army (KIA) has been engaged in fierce fighting with the Chinese-backed military junta to seize control of the town of Bhamo. This strategic town is located less than 100 km from the Chinese border and serves as a gateway to the region where nearly half of the world's heavy rare earths are mined.
These minerals, after being extracted, are shipped to China for processing into permanent magnets. However, in a move first reported by Reuters, Beijing has threatened to halt purchasing rare earths from KIA-controlled territories if the group does not stop its offensive on Bhamo.
Beijing's Ultimatum
According to three sources familiar with the matter, the ultimatum was delivered by Chinese officials during a meeting with the KIA earlier this year. One KIA official stated the demand was made in May, while another KIA commander confirmed that Beijing was represented by foreign ministry officials.
This ultimatum demonstrates how Beijing is using its economic power and near-monopoly on rare earth processing to further its geopolitical aims: stabilizing the border region and reinforcing the Myanmar junta, which it sees as a guarantor of its economic interests.
A KIA official revealed that beyond the threat, Beijing also offered a "carrot": a promise of increased cross-border trade if the KIA abandoned its effort to capture Bhamo. "And if we did not accept, they would block exports from Kachin State, including rare-earth minerals," the official said.
In response to questions from Reuters, China's foreign ministry said it was not aware of the specifics of the deliberations but stressed that "an early ceasefire... is in the common interests of China and Myanmar."
Why Bhamo and Rare Earths Are Important
The battle for Bhamo ignited shortly after the KIA seized control of the main rare-earths belt in Kachin last October. After taking over, the KIA raised taxes on miners and throttled the production of dysprosium and terbium, causing prices for the latter to skyrocket.
The supply has been severely squeezed. According to Chinese customs data, in the first five months of 2025, China imported only 12,944 metric tons of rare-earth oxides and metals from Myanmar, down by half compared to the same period last year.
Losing Bhamo would be a major blow to the military junta, cutting off its land and river access to other parts of Kachin, isolating its troops, and weakening its control over northern trade routes.
The KIA's Dilemma
The KIA, with an estimated force of over 15,000, is one of Myanmar's strongest rebel groups. Despite suffering significant casualties in the fight for Bhamo, its leaders believe they are capable of winning and that China will not follow through on its threat due to its own high demand for the minerals.
"China, which needs rare earths, can only tolerate this for a limited time," a KIA commander asserted.
However, the pressure from China is real. The Myanmar junta has become increasingly reliant on its airpower, and according to the U.S.-based Stimson Centre, Beijing has supplied it with jets and drones. Relentless airstrikes have devastated large parts of Bhamo, killing civilians and destroying schools and places of worship.
According to Neha Mukherjee of the UK-based consultancy Benchmark Mineral Intelligence, a disruption in supplies from Kachin could lead to a deficit in the global market by the end of the year. "In the short term, prices outside of China could shoot up higher," she said.
For now, the future of the global heavy rare earth supply chain depends on whether the KIA can withstand the dual pressures of the junta's firepower and China's economic leverage.
