China to impose rare earth resource tax

March 24, 2011 (Source: Xinhua) — China will impose a tax on rare earth minerals starting April 1, according to a statement issued jointly by the Ministry of Finance and the State Administration of Taxation to rare earth producers.

Zhang Zhong, general manager of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., the country’s leading rare earth producer, confirmed Thursday that the company had received the statement.

According to the statement, the tax rate of mined light rare earths is 60 yuan (9.1 U.S. dollars) per tonne, while that of medium and heavy rare earths is set at 30 yuan per tonne.

Zhang said the tax would increase the company’s production costs by about 720 million yuan this year.

Zhang also said that measures, such as the resource tax, taken to protect the rare earth resources would benefit the company in the long run.

The company headquartered in north China’s Inner Mongolia Autonomous Region is currently the world’s biggest producer of rare earth magnets widely used for making electronic products like computer hard drives and cordless tools.

Yang Wanxi, director of a rare earth expert panel of the Baotou Municipal Committee of Sciences, said taxes of rare earth minerals were currently levied under the category of ordinary non-ferrous metals, whose tax rates were between 0.5 and 3 yuan per tonne.

Baotou Steel Rare-Earth does not pay tax to mine the minerals as its parent company Baotou Steel Group pays it along with other minerals such as iron ore, Yang said.

He said prices of rare earths have been soaring since February, sometimes by 10,000 yuan per tonne a day. The price of neodymium, a rare earth mineral used for making rare-earth magnets, has increased to 600,000 yuan per tonne this week from 300,000 yuan per tonne by the end of last year.

“The rising profits can help producers offset the increased cost from the resource tax,” he said.

Meanwhile the government will use the tax to support research on rare-earth processing and application technology, set up environmental compensation funds or build rare earth reserves, Yang added.

The resource tax is one in a series of new measures unveiled this year by the Chinese authorities to upgrade the rare earth industry. China’s Ministry of Environmental Protection announced earlier this month that tougher rules on emission limits for producing rare earths will take effect on Oct. 1 this year.

The rules are expected to drive small and medium rare earth enterprises out of the industry or force them to merge with big players, thus promoting industry consolidation.

Baotou Steel Rare-Earth (Group) High-Tech Co. announced this month that the company would markedly increase its market share of five major rare earth products including magnetic materials in the next five years, which included rare earth magnets, polishing materials and hydrogen storage alloys crucial to battery production.

How Does China’s Rare Earth Resource Tax Affect the Production of Lithium-Ion Batteries by Boston-Power?

China’s magnetic pull¬†as the world’s leading supplier of rare earth resources directly impacts the production of lithium-ion batteries by Boston-Power. The country’s rare earth resource tax affects the cost and availability of key materials, influencing the competitiveness of Boston-Power’s battery production in the global market.

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