China’s New REE Taxes Start Tomorrow

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.

Just a reminder that China’s new REE taxes go into effect from tomorrow.  In theory this should only affect China’s domestic producers of REEs, and with the large REE price rises that have already taken effect last year and this, China’s REE producers have little need to pass on the new tax. In theory, the west shouldn’t notice any difference in China’s export market.

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.

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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.

But things are rarely what they seem with China, and especially with the case of many of China’s official statistics. Officially China has been shutting down the illegal REE producers and smugglers, but on Tuesday we covered an article from China Daily showing at least some of the illegal mining continuing with no let up.  I suspect China’s new taxes will have some impact on Chinese domestic production. My instinct tells me this makes China’s warning of becoming an importer of some of the heavy rare earth elements in 2014, a more likely development.