China to raise rare earths tax and complete industry consolidation

By Antonio Torrisi
Published: Saturday, 27 December 2014

Proposal to increase tax on rare earths up to 35%; MIIT approves Minmetals’s consolidation plan

The Chinese government drafted a proposal in November 2014 to impose a 22% value tax on light rare earths and a 35% tax rate on heavy rare earths.

China’s resource tax on light rare earths, including bastnaesite and monazite, has been at Chinese renminbi (Rmb) 60/tonne ($9.60/tonne*) since April 2011, with 

tax on medium and heavy rare earths at Rmb 30/tonne ($4.80/tonne).

Experts believe that Beijing’s tax reform will boost rare earths prices, which have bottomed in the last four months. However, others are concerned that the tax may add an extra burden on qualified producers and lead to increased illegal mining.

The government has not included rare earths in the list of commodities recently revised by the Ministry of Commerce as open to foreign investment. 

Consolidation plan moves further

China Minmetals Corp. received the go-ahead to implement its rare earths consolidation plan in early December 2014. 

According to the plan, which was approved by the Ministry of Industry and Information Technology (MIIT), the company’s subsidiary, China Minmetals Rare Earth Group Co. Ltd, will form a large enterprise group, involving firms across the domestic supply chain.

The group, which will trade under the name of Minmetals Rare Earth Holdings Ltd, consists of 31 companies, located in Guangdong, Jiangxi, Hunan, Yunnan, Fujian and Guangxi provinces. 

Its assets include eight separation plants, one exploration right, three mining rights and various processing enterprises, which produce magnetic, luminescent and electronic materials.

In addition, the Minmetals Rare Earth Research Institute, which will study new rare earths applications, will also be part of the group.

The company started its rare earths business in 1973 and has become the world-leading producer of heavy rare earths, including dysprosium and terbium, from ionic clay deposits in southern China.

In December 2014, MIIT also approved Guangdong Rare Earth Group’s consolidation plan.

The company, a wholly-owned subsidiary of Guangdong Rising Assets Management Co. Ltd, said that it will protect and make full use of rare earth resources to promote rare earth industrial upgrading.

The approval corresponds to a further step towards the completion of a governmental policy, which encourages the formation of six large rare earth giant 

groups within China, led by Aluminium China Corp. (Chinalco), Xiamen Tungsten, Inner Mongolia Baotou Rare Earth Steel Hi-tech Co. Ltd, Guangdong Rare Earth Group, Ganzhou Rare Earth Group and China Minmetals Corp.

"Currently, six rare earth groups control 94% of China’s total rare earth resources and 75% of the mines," Yinsong Jia, director of the MIIT’s rare earth office, told China news television programme, CCTV.

"The smelting and separating capacity of the six groups account for nearly 60% of the rare earths industry, but after the consolidation, this will be controlled by the six groups," he added.

*Conversions made December 2014

Rare Earths News Review

NFC’s Southern Rare Earth (Xinfeng) Co 

NFC’s Southern Rare Earth (Xinfeng) Co. has announced the development of a rare earth separation facility in Guangdong with a production capacity of 7,000 tpa rare earth oxides.

The project, which cost Rmb 612m ($97.9m), was approved by the National Development and Reform Commission.

Analysts from the Chinese consulting service CI Consulting considered the move a potential "additional source of overcapacity" in the rare earths market.

Dingli Technology Development Co.

Shanghai Dingli Technology Development (Group) Co. Ltd will develop a facility to produce neodymium-iron-boron (NdFeB) magnets in Guangxi province.

It will build the facility in the Chenxi New Material Technology Industrial Park, and expects to produce 2,000 tpa of magnets.

China Rare Earth Holdings Ltd

Rare earths and refractories manufacturer, China Rare Earth Holdings Ltd’s 95%-owned subsidiary, Yixing Xinwei Leeshing Rare Earth Co. Ltd, is to divest its subsidiary Dongye Rare Earth Co. Ltd for a total value of Rmb 128m ($20.5m).

"Having considered the financial position of Dongye Rare Earth, we believe that the disposal is one of the steps in enhancing the efficiency in the operations of the group. We are still cautiously optimistic about the rare earth market," Quanlong Jiang, China Rare Earth’s chairman, said in a statement.

Hong Kong-headquartered China Rare Earth Holdings produces rare earth oxides (REOs) and refractory products, including high-temperature ceramics, fused magnesium-chrome bricks and alumina-graphite bricks.

Its annual capacity reaches 6,500 tpa REOs and 100,000 tpa refractory products.

China Rare Earth Holdings said it saw a 45% decline in rare earths sales volume, to 1,200 tonnes in H1 2014, due to the persistent weak demand for downstream products and lower average selling prices, which decreased by 10-30% y-o-y for yttrium and europium oxides, and 20-60% for lanthanum, cerium, neodymium and praseodymium oxides.

Prices still falling despite higher exports

China rare earths exports in October amounted to 4,460 tonnes, up 6.8% compared with the same period in 2013, according to data released by China’s General Administration of Customs.

From January to October, the country exported a total of 46,970 tonnes rare earths, up 24.3% compared with the same period in 2013.

However, the average export price from China’s Inner Mongolia Baotou dropped by 26.6% y-o-y, to Rmb 47,000/tonne ($7.52/kg), according to China Customs Statistics.

Prices for dysprosium, terbium and gadolinium remained stable y-o-y, the company said.

Updated rare earths prices can be found on the IM Pricing Database.