Military coup in Myanmar triggered the growth of the market for rare earths
A military coup in Myanmar on February 1 raised concerns about a reduction in the supply of rare earth metals, spurring the sector’s growth. Guosen Securities believes this trend won’t last too long..
The military junta took over authorities in Myanmar and imposed a state of emergency for one year, citing falsified last year’s elections.
The country has mined 30,000 metric tons of rare earth oxides, equivalent to 12.5% of global production in 2020, the US Geological Survey said. Last year this figure was at the level of 10.5%. China’s share of this market is 66.7%, while the USA accounts for 15.8% of the segment.
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«The rally will not be long-term, since the geopolitical risk is not high enough. The military has no interest in weakening Myanmar’s economy», – considers Gary Ching, Chief Analyst for Macroeconomics and Strategy at Hong Kong-based Guosen.
Rare earths include the lanthanide series of elements, metals that are critical to modern technologies such as new energy and electric vehicles. They are used in parts for gadgets from mobile phones to flat screens, as well as catalytic converters in vehicles and wind turbines..
According to the Institute of Rare Minerals and Metals, prices for lanthanum oxides from China were at $ 3,566 per metric ton in December, versus $ 1,810 in August 2019.
This surge indicates strong underlying industrial demand. Events in Myanmar further fueled the excitement, analysts say.
Like most economies, Myanmar is also suffering from the Covid-19 pandemic. Its GDP growth will dip to 1.7% in 2020 from 6.8% a year earlier, the World Bank said last month.. Any international sanctions against the military government could worsen the situation, experts say.
Other stocks affecting the Myanmar economy have shown mixed reactions, suggesting that investors are not particularly worried about the political turmoil.
Norinco International Cooperation, which has active purchase and construction contracts worth $ 700 million, fell 3.4% to 6.57 yuan.
Jiangsu Guotai International Group added 0.6% on Wednesday to 6.30 yuan. The company invested 168 million yuan in the construction of a garment industrial complex in Myanmar. In 2017, the company established a production base there with an area of more than 930 thousand square feet.. China’s Gezhouba Group drops 1.4% to 6.49 yuan. A division of state energy giant China Energy Engineering Corporation to invest $ 311 million in a cement plant in central Myanmar.
«The impact of the political upheaval should not be significant, since the investments of Hong Kong companies in the country are not that great», – said Ernie Hon, Head of Research, Essence International Securities.