Further Chinese Tax Increases for Rare Earths

Posted in Industry News on 12th October 2011 |

The Chinese government has announced that the regional resources tax on rare earth and other commodities such as natural gas, crude oil and coking coal will be implemented nationally from 1st November 2011. The tax will channel significant tax revenues to local governments at the expense of profits at resource companies such as Baotou Steel Rare Earths, the world's biggest rare earth producer. Previously, the government was cautious over tax increases due to inflationary pressures, so this announcement indicates that the authorities believe consumer prices are now under control.

The tax is the latest in a long line of measures for the strategic resource planning of rare earths introduced by the Chinese government since 2007, and export quotas have been reduced year on year. In March 2011, the resource tax on rare earth exports was raised by 1000 percent, causing a huge increase in prices and severe shortages throughout the world.

The Chinese authorities argue that it has to manage vital mineral reserves and protect the environment, but critics argue that China is taking advantage of its monopoly to restrict supply, increase taxes and maximise profits until other countries rare earth production comes on stream. But, are beggars really in a position to be choosers? The recent nuclear meltdown in Japan highlights the importance of alternative energy sources, especially solar power which uses a significant amount of rare earth. In these circumstances, the biggest producer of rare earth is in a position to write the rules, and name its price!

Rare earth metals are a group of 17 minerals, many of which are used in high-tech industries and form an important constituent in foundry materials like Magnesium Ferro Silicon. China produces approximately 97 percent of the world's total supply but only has about 30 percent of global reserves.

Tags: Export Quotas, Magnesium Ferro Silicon Nodularisers, Rare Earth Silicide, Rare Earths