On July 31st, the National Defense and Security Committee of the Republic of the Union of Myanmar issued an order
to declare a 90-day state of emergency in some provinces and towns in accordance with the relevant provisions of
the Constitution in order to quell armed violence and effectively safeguard peace, security and the rule of law in the
relevant areas.
Since Tatmadaw, the Burmese military, seized power in the name of opposing the election results on February 1st, the
domestic situation in Myanmar has been further turbulent. The NLD-supported government composed of the military
government led by General Min Aung Lai and Aung San Suu Kyi's supporters, that is, the government of national unity
, and the various civilian forces in northern Myanmar are intricately intertwined. At present, the NLD government has
organized its own rebel forces and government structures to resist the current military rulers, and the civilian forces in
northern Myanmar are watching from the other side or waiting for their change or supporting the NLD.
The situation in Myanmar continues to be turbulent, and civil war and natural disasters are superimposed, which has a
devastating impact on China-Myanmar supply chain.
First, the latest development: port closure and overweight of rare earth quota system
1. Muse Port was blocked again, and China-Myanmar trade artery was broken.
In mid-July, a fierce conflict broke out between Burmese government forces and local armed forces near Mandalay,
which led to the complete closure of Muse Port, the largest land port between China and Myanmar. This one
The corridor bears 70% of the trade volume between China and Myanmar, and the trade volume from April to
September in 2023 exceeded $1.3 billion. At present, the 445km routine route from Ruili to Mandalay has been
completely completed.
Interrupted, logistics vehicles were forced to bypass other ports in Thailand or Yunnan, the transportation time limit
was extended from 7 days to more than 15 days, and the cost surged by 300%.
2. The rare earth export quota system came into effect, and the global supply chain was in a hurry.
Since August, Kachin State in Myanmar has officially implemented the rare earth export quota system, requiring all
mining licenses to expire before the end of 2025. As the third largest producer of rare earths in the world, Myanmar
74.9% of rare earth oxides are supplied to China, which directly leads to a 15% slowdown in the motor production
line of Tesla Shanghai factory, and Shenzhen Huaqiang North chip wholesalers collectively adjust.
Price. More seriously, the mining areas controlled by the Kachin Independence Army have been completely shut down,
and the gap between supply and demand in the medium and heavy rare earth market has further widened.
3. The earthquake made matters worse, and the supply chain of agricultural products was paralyzed.
In June, the Mandalay earthquake of magnitude 7.8 led to the collapse of 90% houses in Jiesha Town, Sagaing Province,
and the complete destruction of railways and highways. Corn, sugar cane, etc. in this "granary" in northern Myanmar.
Agricultural products can't be shipped abroad, local prices soared by 300%, and the import of fruits, such as bananas,
which affected Yunnan, China fell by 60% year-on-year.
Second, the supply chain crisis: soaring costs and the risk of supply failure
1. The transportation cost has exploded.
Alternative route trap: Kachin Army's "toll" is required to bypass Tengchong Monkey Bridge Port, and the fine for
hardware goods is as high as tens of millions of kyats (about RMB 20,000)
Yuan). Trucks leaving Zhangfeng Port in Longchuan need to travel on rugged mountain roads for 5 days, and the loss
cost of vehicles increases by 40%.
The hidden cost surged: the exchange rate of Myanmar dollar plummeted to 1:20 (the official exchange rate was 1:34),
and the exchange loss of logistics enterprises accounted for over 15%. Even more deadly, insurance companies
collectively
Refusing to insure goods in war-torn areas, enterprises have to bear the risks of fire, robbery, etc.-In 2023, the fire in
Mujie freight yard caused 120 trucks to burn down, and the average loss of the owners.
Over one million yuan.
2. Chain reaction of key materials supply interruption
Rare Earth Crisis: Myanmar's medium and heavy rare earths account for 50% of the global supply. After the
implementation of the quota system, the domestic price of NdFeB magnetic materials has exceeded 800,000 yuan/ton.
Optimus robot mass production plan may be postponed for 6 months.
Shortage of agricultural products: The corn and sugarcane in Jiesha Town can't be transported abroad, which leads to
a 25% increase in the raw material cost of feed enterprises in Yunnan, China, and the aquaculture industry faces the risk
of grain shortage. At the same time,
Myanmar's imports of jadeite raw stone decreased by 77% year-on-year, and domestic jewelers turned to Laos and
Guatemala to find alternative resources.
3. Policy uncertainty exacerbates risks
The United States is deeply involved in the civil war in Myanmar, smuggling American-made weapons to support local
armed forces through the Thai-Myanmar border, and further intensifying the conflict. At the same time, the Burmese
military government frequently adjusted
The whole trade policy, such as requiring importers to settle accounts in US dollars and raising mineral resources tax,
has led to a 30% increase in compliance costs for enterprises.
Third, the way to break the situation: diversified layout and emergency plan
1. Logistics channel: open up the Shinkansen through public and water transport.
Chongqing-Mandalay combined transport: The "Chongqing-Yunnan Guanlei Port-Mandalay, Myanmar" line was opened
in March, integrating highway flexibility and low waterway development of Mekong River.
This advantage, the whole journey only takes 15 days, and the freight rate is reduced by 20% compared with the
traditional route. This line has successfully transported bulk goods such as automobile and motorcycle products and
electronic products, which is suitable for aging.
A manufacturing enterprise with higher requirements.
China-Laos Railway Diversion: The goods are transported to Laos by Kunming-Vientiane Railway, and then transported
to Yangon by sea via Linchaban Port in Thailand, which can avoid the conflict area in northern Myanmar. Although this
scheme
The aging time is extended to 20 days, but the stability is significantly improved, which is suitable for the transportation
of bulk building materials and durable goods.
2. Supply chain resilience: establish a dual hub+multimodal transport system.
Double hub strategy: set up regional distribution centers in Yangon and Mandalay, covering the southern and central
markets of Myanmar respectively. As an international shipping hub, Yangon Port can pass
Singapore and Hong Kong transit global goods; The Mandalay Center radiates the China-Myanmar border by relying
on the newly opened public-water combined transport line.
Combined insurance by land, sea and air: in view of the risks such as war and earthquake, the combined scheme of
"road transport insurance+marine all risks+war insurance" is adopted, and the premium is controlled at the value of the
goods.
0.8%-1.2%, covering more than 80% of accidental losses.
3. Resource substitution: solving the dilemma of rare earth and agricultural products
Rare earth substitution scheme: cooperate with rare earth enterprises in Sichuan and Jiangxi to develop light rare earth
substitution technology and reduce dependence on medium and heavy rare earth in Myanmar. At the same time,
through futures
The market locks in the price of rare earths in 2025 to hedge the impact of the quota system.
Reorganization of agricultural product supply chain: corn and sugarcane planting bases will be established in northern
Laos and directly supplied to Yunnan through China-Laos Railway. At present, the project has achieved an average
monthly supply of 5,000 yuan.
Tons, the cost is 15% lower than that of Myanmar.
Fourth, the window of opportunity in the crisis
Although the short-term risks are high, in the long run, the changes in the situation in Myanmar also breed new
opportunities:
1. Bonus of new trade route: The alternative channel opened through China-Myanmar negotiation is expected to be put
into use by the end of 2025, which will ease the dependence on Muse Port. Layout the line in advance
Enterprises can seize market opportunities.
2. Policy window period: In order to attract foreign investment, Myanmar military government provides tax relief and
land concessions for logistics infrastructure projects. For example, the Yangon Port expansion project has been awarded
Chinese-funded enterprises are eligible to participate, and the throughput capacity will increase by 50% after completion.
Source: Myanmar Ministry of Commerce, SMM, Guojin Securities, Southern Weekend.
