The new environmental tax law to be implemented in January 2018 is set to
raise industrial minerals’ production cost in
China, as the government is tightening regulation on industrial
The Chinese government passed the "environmental protection
tax law" on 25 December 2016 and the new regulation will be in
placed by 1 January 2018. On 26 June, China’s
state administration of taxation (SAT) published the draft bill
listing a series of guidelines. The authority is calling for
market feedback before a 26 July deadline.
Unlike previous environmental legislation, Beijing is
committed to enforce this new law as Chinese president, Xi
Jinping, has declared cleaning up the environment as the top
priority for the country. Furthermore, the wave of
anti-pollution crackdown, which started in mid-2016 in Shanxi
and Henan, has since spread to other regions including
Liaoning, Guizhou, Hunan, Shandong and Xinjiang.
As a result of the strict environmental inspections, many
minerals productions were shut down over different periods:
calcined bauxite, brown and white fused alumina, magnesia,
fluorspar, barytes, antimony trioxide and calcium carbonate
were all affected, while graphite is also expected to be
impacted over the coming weeks.
China is the biggest producer of industrial minerals
globally and the production stoppages caused severe supply
disruptions worldwide. Even many downstream chemicals
industries in China have been hit: hydrofluoric acid and
aluminium trifluoride production were slashed, while
restrictions on chromium chemicals producers have dampened
China’s demand for chromite.
This recent trend was in stark contrast to the past decades
where many minerals producers have been mining and producing
with little concern for the environmental impact. Lack of
regulation on waste management and emissions meant that many
Chinese producers were able to offer low-cost minerals for
export, as they did not have to invest in expensive, modern
equipment for environmentally-friendly waste treatment and
However, the new stance from Beijing signified that the era
of low-cost minerals production could be over as the government
is keen on upgrading the manufacturing industry and
accelerating green development in China.
Despite the anti-pollution measures across China show no
sign of receding, some market participants believed the
clampdown would be temporary, production would resume in the
short-term and prices would fall as a result of operations
returning to normal.
"Lots of customers believe prices will go down and that this
is a short-term problem in China. My gut feeling is they will
not go down and, if they do, it will be by a very small
amount," one Europe-based minerals distributor told
"Xi Jinping, he’s not mucking about […]
Normal rule doesn’t apply in China at the moment.
The reality is, this is not a little blitz, this is a
structural change," he said.
Under the environmental law, all manufacturers must comply
with the thresholds on emission and waste disposal and they
will be taxed accordingly based on the volume of pollutants
This new law is set to limit the amount of emissions and
waste generated from the manufacturing industry in China, since
all forms of waste will be taxable from 2018 onward. It is
hoped the measure will push companies to upgrade facilities and
phase out polluting industries.
The draft regulations detailed a number of articles, which
regulate and set guidelines for emissions and waste generation,
storage and disposal.
Under the new rules on taxable solid waste, the volume of
solid waste generated from production will be regulated based
on a formula considering a number of criteria: the amount of
waste created and its utilisation, treatment, storage and
In addition, daily average emissions of taxable pollutants
must not exceed the set national and local government
thresholds, while waste disposal permit holders cannot exceed
their monthly discharge quota.
In order to collect the taxes, the SAT and the ministry of
environmental protection will establish a common platform and
system to monitor the pollution level in the country and its
related tax revenue.
All producers must declare detailed information on the type
and volume of emissions and waste, the method of disposal,
storage and utilisation, and the supporting documents.
Although some welcomed this new law as it could potentially
consolidate the minerals’ industry in China,
others worried that stringent regulation could hike operation
cost and place undue pressure on companies.
"The production cost will rise by a couple of hundreds
renminbi, and it will eliminate some companies," said one fused
alumina producer in Henan. "But the burden on enterprises will