Have the Wa Cornered the Global Tin Trade?
By Seamus Martov 25 February 2016
A recent paper published in the journal Resources Policy concludes that a new tin mining operation located in a corner of northern Shan State controlled by the United Wa State Army (UWSA) appears to be responsible for elevating Burma in just a few years from being a bit player in the global tin industry “to the status of the World’s third largest tin producing country.”
What the authors call a potential “black swan event” represents a 4900.00 percent increase in tin production over a five year period, from 2009 to 2014, according to figures provided by the UK based International Tin Research Institute (ITRI), a not for profit group with close ties to the mining industry.
“Tin mining in Myanmar: Production and potential,” published in December and authored by Oxford University professor Nicholas J. Gardiner and three others, suggests that the massive increase in tin production from Burma is a development completely unforeseen by commodity analysts and one that has had significant ramifications for the tin industry worldwide.
According to the paper, the Wa-controlled tin production is centered at the Man Maw mine which is said to be some 90 km from Panghsang (also known as Pangkham). The authors suggest that the high level of tin production at the Man Maw mine will not last long but due to a lack of hard data from the area it remains far from clear how much tin remains to be mined.
According to a person familiar with Man Maw cited by the paper’s authors, the mine site is about 100km2 with a “number of small mining companies” in operation at the site. Annual production of tin from Man Maw was estimated to be nearly 30,000 tons in 2014, making it one of the largest tin mining sites in the world.
“The giant San Rafael mine in Peru was the World’s single biggest tin mine producer, until the apparent recent rise of the Man Maw mining complex,” the paper says.
The Wa territory has no tin smelting capacity of its own and everything mined in Man Maw appears to be destined for China which, according to the paper’s authors, in 2014 imported 177,950 tons of tin ores and concentrates, 97 percent of which came from Burma. Tin is most widely used for solder, a key component in electronics manufacturing.
The ITRI, which describes itself as being “supported by the world’s most important tin producers and smelters,” reports that thanks to tin concentrate imports from Wa controlled territory, China for the first time in 6 years became a net exporter of refined tin in 2014; a development with major implications for the industry worldwide.
“If the low cost production from Myanmar is maintained this has the potential to re-shape the industry cost curve, leading to longer-term lower tin prices,” the authors contend, predicting lower prices could lead to less production in other mining areas where production costs are increasing.
The low cost of tin globally continues to be an issue for mining firms worldwide. A quarterly report released in July of last year by the Australian Stock Exchange (ASX)-listed firm Kasbah Resources Limited, singled out the rise in tin exports from Burma and tin from UWSA territory in particular, as one of two major factors behind a fall in global tin prices in 2014.
“The availability of low cost ore and concentrates from Myanmar (particularly the Maw Maw mining area in the Wa County) and its proximity to the Yunnan Province in China has been problematic for the tin market,” said the firm, which is focused on developing tin mining concessions in Morocco.
“This rapid growth of tin concentrate imports from Myanmar provided an opportunity for traders and Chinese tin producers to purchase lower cost and higher grade material to refine to metal in China, then export that metal to the international market.”
Similarly, the 2014 annual report of the Malaysia Smelting Corporation (MSC), which bills itself as the world’s second largest supplier of refined tin, cited the large amounts of tin mined in UWSA territory as a worrying development.
“While tin demand has remained relatively stable, recent reports on the high artisanal production from the Wa State in Myanmar is a major concern to the industry,” the report noted.
Past its Peak?
But it is far from clear how much metal there is left to mine. An update released by the ITRI last June predicted a future decline in tin exports from UWSA territory citing public comments made by a senior official from the Yunnan Tin Company (YTC) whose firm had recently visited the Man Maw mine.
“At the ITRI China International Tin Forum in Shanghai, YTC’s General Manager, Zhang Fu, outlined the company’s belief that Myanmar’s 2014 tin production was a peak, and that resource and grade depletion at Man Maw will result in a progressive decline in production in the following years,” the update noted.
Despite this prediction, tin production from Burma actually went up in 2015 compared to the previous year, according to estimates provided by ITRI in an update released last August. Stefan Ljubisavljevic, a commodities analyst with the Australian bank Macquarie Securities recently told a trade publication that in fact he expects tin exports from Burma to increase.
“Due to the unstable political situation in Myanmar’s major tin mining locations, what has been produced and exported so far is the low hanging fruit of production and with less uncertainty tin production could continue to rise in the coming years,” Ljubisavljevic told Platts Metals Daily in November. His bank estimates that since 2012, Burma’s share of global tin production has grown to over 10 percent of global production from less than 2 percent.
There are other significant sources of tin in Burma, most notably in Dawei in Tenasserim Division and at Mawchi in Karenni State. The latter was once one of the biggest tin mining areas in the world during colonial times, but neither source appears to be producing at levels anywhere near what is being produced in UWSA territory.
The fact that the world’s tin prices are being affected in part by the policies set by a reclusive group of ex-communist rebels in a remote corner of northern Shan State has so far received little attention, apparently even among those following the Burmese mining sector.
There was no mention of the Man Maw areas significant contribution to the global tin trade in the recently released Extractive Industries Transparency Initiative (EITI) report for Burma, which included other significant tin mining operations in the rest of the country, in an otherwise detailed overview of the country’s mining industry.
The UWSA was formed in 1989 following the dramatic implosion of the Communist Party of Burma (CPB), which was then headquartered in Panghsang. As the CPB’s ageing leadership fled to China, Burma’s then biggest armed group split several ways with a faction that eventually became the UWSA emerging as the biggest grouping that quickly reached a ceasefire with the military regime.
The senior leadership of the UWSA, many of whom were previously mid-ranking officers in the communist party who took part in a rebellion against the CPB’s almost exclusively Burman leadership, maintain good relations with China, ties that were formed when Beijing was strongly backing the CPB in its armed struggle against Burma’s leader Ne Win.
Chinese is taught in UWSA run schools and is spoken widely throughout the UWSA territory which is officially called Shan State Special Region No 2, but which the UWSA often refers to as Wa State.
The significant amounts of tin being mined and exported from UWSA territory to China adds an extra dimension to the UWSA’s relationship with the Chinese government, who consider the continued supply of tin and other minerals known as rare earths used in electronics, to be of major importance to the country’s economy.
The Wa, who are recognized as a distinct ethnic group by both the Burmese and Chinese governments, were known historically for their headhunting prowess. At the time of Burma’s independence, few would have predicted that the Wa, most of whom resided in remote areas largely ungoverned by colonial authorities, would go on to form Burma’s strongest ethnic armed group.
While it remains unclear how much tin remains to be found in the Wa hills, any interruption to the UWSA’s 26 year-long ceasefire with the central government would likely affect mining and thus impact global tin prices overall. The UWSA’s well-equipped ranks are estimated by some to be between 20,000 to 25,000 strong, bigger than the standing armies of several European nations.
Its hefty army helps maintain a status quo in which the central government has little if any authority over a large swath of UWSA territory running along the Chinese border and a smaller area along the Thai border that the UWSA took control of in the late 1990s and early 2000s.
A series of indictments filed by US authorities over the years against the UWSA leadership, including Chairman Bao Youxiang, for their alleged involvement in the global drug trade have helped keep the Wa territory largely cut off from western visitors. The group has long denied these claims which it says are part of a smear campaign.
“We, the UWSA, are wholeheartedly engaged in the fight against drug-dealing,” the group’s spokesperson, Aung Myint, told The Irrawaddy in a 2013 interview. “For seven years since 2005, there have been no poppy fields and no poppy plants in our region. This has finished. That’s why the world should recognize us.”
The UWSA has also been identified as a major player in the jade trade in a series of reports issued by Global Witness last year. Global Witness alleges that Wei Hsueh Kang, often described as the UWSA’s banker, and his associates “have used a web of opaque company structures to build, and disguise, a jade empire.”
Wei Hsueh Kang, who has rarely been seen in public since the US government put a $US2 million dollar bounty on his head, is considered to retain influence in the group, particularly within the 171st Brigade, which controls the UWSA’s territory along the Thai border.
Though they officially remain in a ceasefire, the UWSA’s relationship with the central government has been strained for some time. The UWSA has been wary of the army’s attempts to drive their allies the Shan State Army-North from their positions near Wa territory which have served as a buffer between them and the government.
The UWSA were notably absent from the signing ceremony for the nationwide ceasefire agreement (NCA) last October, hosted by President Thein Sein in Naypyidaw. The group instead hosted a summit in November of its own that included other non NCA signatories, including the Kachin Independence Organization, the Ta’ang National Liberation Army and the Arakan Army, just before the election.
That meeting and a similar summit held in Panghsang in May were seen by many as something of a coming out party for the UWSA, who for the most part had avoided high profile gatherings of ethnic armed groups.