China imposes tax on rare earth production from April 1

China’s Ministry of Finance and State Administration for Taxation will start levying a tax on rare earth elements mined in the country beginning on April 1.

The tax amounts to 30 yuan (US$4.54) per ton for medium and heavy rare earth elements (HREEs) and 60 yuan (US$9.10) per ton for light rare earth elements (LREEs).

The tax is likely to be used to support research on the processing of rare earths, environmental compensation, and building rare earth reserves, according to local news reports.

Chinese media reported the new taxes would increase production costs for China’s largest producer of rare earths, Baotou Steel Rare-Earth Hi-Tech Company, by 720 million yuan (US$109.8 million) in 2011.

Taxes on rare earth elements in China currently fall under the category of ordinary non-ferrous metals, which are taxed at rates of between 0.5 and 3 yuan per tonne, according to China’s state-run Xinhua news agency.

Xinhua also reported that prices for rare earths have been surging since February. The price of neodymium, it reported, has risen to 600,000 yuan per tonne, up from 300,000 yuan per tonne at the end of 2010.

According to the Wall Street Journal, half of the initial 2011 export quota for China’s rare earths had already been shipped out of the country by the end of February.

Xinhua reported that the tax measures are part of the government’s efforts to upgrade the REE industry. Earlier this month, China’s Ministry of Environment and Protection announced more stringent rules on emissions from rare earth production that will take effect in October. “The rules are expected to drive small and medium rare earth enterprises out of the industry or force them to merge with big players, thus promoting industry consolidation,” Xinhua reported.

China’s consumption of rare earths has been growing steadily since 2004. In a presentation earlier this month at the PDAC in Toronto on behalf of Chen Zhanheng, director of the academic department at the Chinese Society of Rare Earths, Chen’s figures showed that China consumed 73,000 tons of rare earths in 2009 and imported 10,381 tons of rare earth concentrates.   

Between January and September 2010, China exported 32,155.92 tons of rare earths worth US$474.4 million, or an average price of US$14.75 per kilogram, Chen’s figures showed.