China to cut medium and heavy RE resource tax

China will cut a resource tax on medium and heavy rare earth elements by 7pc to 20pc effective 1 September 2020 but maintain its 7-12pc resource tax on light rare earths, according to China's new resource tax law, which took effect on 26 August.

The lower resource tax, which will in turn reduce production costs and prices of medium and heavy rare earths, is expected to ease the financial burden on domestic firms.

Medium and heavy rare earths producers had voiced concerns that the 27pc resource tax was adding to their cost pressures, amid already-narrow profit margins and low

capacity utilisation rates.

China implemented the resource taxes on 1 May 2015, imposing a 27pc levy on medium and heavy rare earths and 7-12pc on light rare earths.

The country's main producing regions for medium and heavy rare earths are Jiangxi, Fujian, Guangdong and Guangxi. But environmental inspections and a ban on ore imports from Myanmar since mid-May have tightened ore supply and lifted prices this year.

Prices for 99.5pc dysprosium oxide and 99.99pc terbium oxide held at 1,900-1,920 yuan/kg ($265-268/kg) and Yn3,920-3,950/kg, respectively, today on firm production costs, tight ore feedstock supply and the ongoing US-China trade war.

Prices for 99.5pc dysprosium oxide increased to Yn1,980-2,050/kg in mid-June, its highest level so far this year, from Yn1,195-1,225/kg at the start of 2019. Prices for 99.99pc terbium oxide rose to Yn4,250-4,300/kg in late June, its highest level since the start of this year when prices were at Yn2,920-2,950/kg, on limited spot availability and a fall in ore supply.

China's light rare earths producers are mainly located in Inner Mongolia, Sichuan and Shandong provinces, which are charged resource taxes of 11.5pc, 9.5pc and 7.5pc, respectively, unchanged since 2015.