Tax changes will drive up rare earth prices
June 5, 2014 Category Automotive Metals & Minerals, Minerals
A change in taxes on rare earth producers in the second half of the year could push up the prices of the scarce minerals, an industry source said. Taxes would be imposed based on the value of the minerals, rather than on volume as is the case at present. That shift will mean higher prices at the producer level, which the government hopes will reflect the scarcity of these resources and the environmental costs of their extraction. Higher prices will alter the supply-demand balance, undercut smuggling and reduce high inventories of rare earths overseas, said the expert quoted by the China Daily. Other steps will also be taken, such as a requirement for environmental compliance certificates to export the materials. China, with rare earth reserves accounting for about 23% of the global total, supplies more than 90% of the world’s demand, but mining and processing causes much pollution. As a result of a WTO ruling, China is expected to lift export tariffs, while the existing export quota system has become irrelevant in recent years since actual export volumes fell short of quotas. Prices of the minerals were weak in 2013, affecting Chinese producers. In Baotou, Inner Mongolia, which has 34 large-scale producers, the industry’s revenue reached CNY1.81 billion last year, down 25.3%. Profits sank 4.7% to CNY210 million, while exports slid 47.2% to CNY31 million. China’s leading rare earth producer, Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co, said net profit slumped 71.7% year-on-year to CNY69.38 million in the first quarter of 2014. Revenue tumbled 52.8% to CNY1.09 billion, the China Daily reports.
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