Battle for Bhamo: Myanmar’s Rare Earth War Puts Global Supply Chains at Risk

 Northern Myanmar – A simmering conflict in the remote hills of northern Myanmar is reverberating far beyond the region’s borders, threatening to disrupt the global supply of heavy rare earth elements essential for electric vehicles, wind turbines, and advanced electronics.

At the center of the crisis is the strategic town of Bhamo, less than 100 kilometers from the Chinese border, where the Kachin Independence Army (KIA) has been locked in fierce combat with Myanmar’s Chinese-backed military junta since December. The battle is not only a turning point in Myanmar’s wider civil war but also a geopolitical flashpoint with implications for the world’s high-tech industries.

Nearly half of the world’s supply of heavy rare earths—critical for producing high-performance magnets—is mined in Myanmar’s Kachin State, particularly in territories now controlled by the KIA. These raw materials are typically transported to China, which dominates global rare-earth processing, for refinement and export. However, fighting around Bhamo has severely restricted mining operations and rare-earth exports have plummeted in 2025.

Beijing’s Ultimatum

According to three sources familiar with the matter—including a senior KIA official and a field commander—Chinese officials delivered a blunt warning to the KIA in a closed-door meeting earlier this year: cease efforts to seize Bhamo, or face an economic blockade, including a halt on purchases of rare earths from KIA-held territory.

The demand, made in May and reported here for the first time by Reuters, underscores China’s strategic use of its mineral supply chain dominance to influence the trajectory of conflicts that threaten its regional interests. The KIA official confirmed that the warning was accompanied by an offer of expanded cross-border trade if the rebels backed off from Bhamo.

“Beijing made it clear: abandon the offensive or face restrictions on exports from Kachin, including rare-earth minerals,” said the official, speaking on condition of anonymity. It remains unclear whether China has acted on its threat, though shipments to China have sharply declined.

China’s foreign ministry, responding to questions, said it was unaware of the specific discussions with the KIA but reiterated its call for peace. “An early ceasefire and peace talks between the Myanmar military and the Kachin Independence Army are in the common interests of China and Myanmar, as well as their people,” a spokesperson said.

Rare Earths in the Crosshairs

China imported just under 13,000 metric tons of rare-earth oxides and metals from Myanmar in the first five months of 2025—a nearly 50% decline from the same period last year, according to Chinese customs data. Despite a modest rebound in May, the long-term trend points to growing instability in the supply chain.

The KIA’s capture of key mining belts in Kachin last October led to higher taxes on miners and a throttling of production, pushing global prices of dysprosium and terbium to new highs. With rare earth supply outside of China already limited, further disruption could send prices soaring, said Neha Mukherjee of Benchmark Mineral Intelligence.

“In the short term, any prolonged disruption could cause sharp price surges in markets outside China,” Mukherjee warned.

The Battle for Strategic Control

The KIA, one of Myanmar’s most formidable ethnic armed groups with an estimated 15,000 fighters, was established in 1961 to demand autonomy for the Kachin minority. Since the 2021 military coup, it has emerged as a key force resisting junta control in the north.

According to KIA field reports, more than 5,000 of its personnel and allied forces are engaged in the offensive for Bhamo. While KIA fighters have cornered junta troops into isolated pockets, the military retains air superiority and has unleashed a wave of airstrikes on the town.

Satellite imagery reviewed by the Australian Strategic Policy Institute confirms widespread destruction in Bhamo, consistent with air assault patterns. Civilian casualties, including children, and the bombing of schools and places of worship have also been reported.

“My home was bombed,” said Khon Ja, a Kachin activist and Bhamo native. “I fear the revolutionary forces won’t be able to resist China’s pressure much longer.”

Despite mounting costs, KIA commanders remain confident of seizing Bhamo, a key military and logistical hub with river and land links into Kachin and neighboring regions. According to a defector from the junta, Maj. Naung Yoe, losing Bhamo would isolate junta forces and cripple their hold over northern trade corridors.

A Geopolitical Chessboard

Analysts believe China is not seeking to resolve the broader conflict but is instead focused on restoring stability in areas critical to its commercial interests. Beijing has invested heavily in Myanmar and views the junta as a useful guarantor of its regional ambitions.

Last year, China successfully brokered a ceasefire to allow junta forces to retake Lashio, another strategic northern town. Beijing has also reportedly supplied drones and jet fighters to the junta, according to the U.S.-based Stimson Center.

However, in Bhamo, the KIA shows no signs of retreating. “If we succeed in capturing Bhamo, it will shift the balance of power and force China to recognize us as a legitimate stakeholder,” a KIA commander told Reuters.

As the standoff intensifies, the world watches with growing concern. The outcome of this battle could not only reshape Myanmar’s civil war but also destabilize the global flow of rare earths—materials that power the green energy transition, advanced defense systems, and the digital economy.