Feb. 17 (Bloomberg) -- China raised the resources tax on six minerals, including iron ore, tin and molybdenum, to help conserve reserves in the world’s second-biggest economy.
The tax on iron ore production was raised to 80 percent of a base rate, from 60 percent, effective from Feb. 1, the official China Taxation News said in a report today, citing a joint circular from the Ministry of Finance and State Administration of Taxation. The base rate is between 2 and 30 yuan ($4.76) a metric ton, depending on the ore grade, according to a government notice in October.
“Iron ore mining generates huge profits,” said Zeng Jiesheng, a Shanghai-based analyst with researcher Mysteel.com. “The changes in the tax will have little impact on costs, though they will help boost tax revenue for local governments.”
China, the world’s largest buyer of iron ore, is taking steps, including fiscal measures, to slow mineral production growth to conserve the environment. The government is also increasing tax rates to spur electricity saving in power-intensive industries after the country missed its energy-reduction target for the five years ended 2010.
The resources tax on tin was increased to as much as 20 yuan a ton and that on molybdenum, used to harden steel, was raised to as much as 12 yuan a ton, said China Taxation News, a publication of the State Administration of Taxation. That’s equivalent to a 20-fold jump for tin and a gain of 4 yuan a ton for molybdenum, according to Shanghai Securities News.
“The tax rate increases are the first for iron ore and molybdenum since Jan. 1, 2006, and maybe longer for tin,” said Heng Kun, a Shanghai-based analyst with Essence Securities Co. China is the world’s largest producer of tin and molybdenum.
China Vanadium Titano-Magnetite Mining Co., a non state-owned iron ore producer in Sichuan province, added 1 percent to close at HK$2.05 in Hong Kong. China Molybdenum Co. and Jinduicheng Molybdenum Co., the country’s biggest producers, fell. China Molybdenum dropped 0.7 percent to HK$4.08, while Jinduicheng declined 0.4 percent in Shanghai trading.
“Compared with the price of tin ore, the tax increase is nothing,” Wu Xiaofeng, an analyst at SMM Information & Technology Co., said by phone from Shanghai. Tin ore with 40 percent content in Yunnan is about 120,000 yuan a ton, and the new tax for the highest grade is 20 yuan, according to Wu.
Yunnan Tin Co., listed in Shenzhen, is the world’s largest producer of the base metal. The shares fell 0.6 percent to close at 23.37 yuan, while the Shanghai Composite, the benchmark in China, increased less than 0.1 percent.
The impact on tin producers will be short term as they can pass on additional costs to customers amid a scarcity of the metal, China International Capital Corp. analysts, led by Hong Kong-based Cai Hongyu, said in an e-mailed note.
The government also adjusted the resources tax on magnesite, pencil stone and boron rocks, China Taxation News said.
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