Chinese Government Slashes Resource Tax to Save its Domestic Miners

Published By : 10 Apr 2015 | Published By : QYRESEARCH

In an attempt to help the domestic iron ore industry, China has decided to reduce its iron ore resource tax from May 1. China’s resource tax is among the highest in the world and with the reduction in the resource tax, it aims to help the domestic iron ore producers. 

Brazilian miner Vale and Australian miners Rio Tinto and BHP Biliton are among the top iron ore suppliers. To increase their production in China, these top producers have been trying to remove the high cost incurring lesser efficient miners in China. The Chinese cabinet mentioned that from May 1, it would slash the tax collected from the domestic producers by half to 40 percent of the base rate. However, analysts forecast that Beijing’s efforts might not help the very small, loss making domestic miners.

According to The Steel Index, iron ore witnessed a drop of 25 percent in February and hit a further low mark of below $50 a tonne last week. Majority of China’s ore mining capacity is at a loss and at the small mines, the capacity utilization rates have dropped to 20 percent. Compared to the Brazilian and Australian ores, the ores from Chinese mines contain less than 30 percent iron. Analysts at Morgan Stanley mentioned that a surplus of iron ore supply in the market would be detrimental to the price of iron ore which is expected to be in the medium price range of $55-$65 per tonne. Chinese government’s latest effort reflects that even though it aims to cut down the inefficient sectors, it is trying its best to help the domestic miners. 
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