Rare Earth Resources Tax: Should Be Changed from Quantity to Depreciation

In order to protect the rational development of rare earth resources, in recent years, around the "restricted exports" and "merger and reorganization" two aspects, the government has introduced a series of related policies one after another. Starting from 2009, the price of rare earths has risen sharply by more than 100%.

Although the rare earth industry is caught in a turbulent cycle, although rare earths are abundantly produced, China is still in an extensive stage in the application of rare earths. For a long time, our country's rare earth products have been dominated by raw material products, and the development of deep processing products has been slow to start. Rare earth deep processing technology has been far behind developed countries such as Europe, America and Japan. The huge profits of deep processing of rare earths have remained abroad; on the contrary, Most of the domestic rare earth applications have the disadvantages of low-end fields, low added value, and small profit margins.

China’s rare earth export policy has already attracted the attention of the international community. After the reduction of China’s rare earth export quota, the price of rare earth resources has risen steadily.

Rising prices of rare earth resources all the way, should be conducive to the development of the domestic rare earth industry. However, the reality is that the profit of producing rare earth resources is higher than that of the application field. Rising prices have made the rare earth industry pay more attention to low-value-added rare earth resources, but they are not making progress in application technology.

The increase in resource prices is much greater than the price of applied products. According to customs statistics, in the first half of 2010, the export of rare earth smelting and separation products in China was 20315.6 tons of REO, which was 64.4% higher than the 1,3991.1 tons of REO in the same period of 2009. During the same period, the export value of China's rare earth smelting and separation products reached US$256 million. 239%. In the application products that are not subject to quota restrictions, the total exports of rare earth permanent magnets reached 6424.3 tons in the first half of 2010, an increase of 97% compared with 3258.9 tons in the same period of 2009, and foreign exchange earned through exports increased by nearly one percent from the same period in 2009. Times. At present, the profits of enterprises producing applied products are far less profitable than directly selling resources. Taking magnetic materials as an example, the gross profit rate of applied products is 15%, and the gross profit rate of such primary products is about 30%.

The huge disparity in profits has made production companies unwilling to work hard on applications, and has also caused companies engaged in applied production to lose their incentive to innovate.

"Limiting exports" and "merger and reorganization"

The State Council Executive Meeting on February 16 this year studied the deployment of policies and measures to promote the sustainable and healthy development of the rare earth industry. Special mention was made of the plan to allocate resources and reasonably determine the annual total amount of rare earths and export quotas.

Data show that in 2010, the total amount of China's rare earth export quotas has decreased by about 30% from 2009. In 2011, the export quota for rare earths has not yet been determined. However, in December last year, the Ministry of Commerce announced that the first batch of rare earth export quota for 2011 was 14,446 tons, which was a decrease of approximately 11.4% from the first quota of 16,304 tons last year.

On May 10, the "Several Opinions of the State Council Concerning the Sustainable and Healthy Development of the Rare Earth Industry" was released. With regard to the “advice” for industrial access to rare earths and measures to promote the merger and reorganization of the rare earth industry, once they have been refined and implemented, it will inevitably accelerate the survival of the inferior and the inferior of the rare earth industry and accelerate the large-scale merger and reorganization. This opinion, as a program document for the rare earth industry promulgated by the State Council, is of great significance to the development of the industry.

From the publication of the Opinions, it can be seen that the state has begun to rectify the problems in the development of the rare earth industry from a strategic and highly planned level and seriously promoted the development of the entire industry. In order to effectively advance the pace of mergers and reorganizations, the state is in the environment access system, In terms of export management and taxation, more stringent policies will be implemented.

The author believes that China imposes a relatively high resource tax on rare earth industries, and the increase in production costs will not only block a part of blindly-entered capital, but also crowd out SMEs that cause environmental pollution. High resource taxes can also increase the price of products and reduce foreign storage. Although this helps to curb indiscriminate sale by increasing mining costs, it is still levied in quantities rather than levied on prices, and if the price of rare earths rises further in the future, the quantitative approach may still fail to achieve effective control.

Raising the cost of extracting rare earths from the resource taxation level is mainly due to the fact that it is still not possible to effectively control rare earth production through the restriction of government orders alone. Since 2011, China has repeatedly issued protection measures for rare earth resources, including the requirements for R&D and industrialization of key application technologies for rare earths proposed at the State Council's executive meeting, and the setting of rare earth planning areas and environmental protection thresholds passed by the Ministry of Land Resources and the Ministry of Environmental Protection respectively. The Ministry of Industry and Information Technology is currently brewing the conditions for access to the rare earth industry and plans for the development of rare earth industries. They have not touched the essence of the sale of rare earth resources in China - the cost of exploitation is too low.

Leading enterprises dominate the rare earth industry is an inevitable trend "Rare Earth Industry Development Plan 2009-2015" and "Rare Earth Industry Access Standard" and other industrial policies will promote the development of China's rare earth industry to intensive, and promote the transformation of rare earth industry development methods, enhance mining, The level of smelting and application technology will accelerate mergers and acquisitions in the industry and increase industrial concentration.

Under the present rare earth pattern, it is an inevitable trend to strengthen the concentration of mining in the rare earth industry and accelerate the integration of enterprises. In the future integration, large-scale central enterprises such as Minmetals, China Aluminum, and China Zhongxie will act as the “leading enterprises” for restructuring. Local leading enterprises are rampant, and Chenzhou rare earth company will join the tide of integration with the support of local governments. The central and local rare earth companies are fighting for rare earth resources. However, central enterprises want to acquire the leading position and need to go through market competition.

In the next five years, China's rare earth industry is expected to achieve a sustainable and healthy development pattern, but it is expected that it will be difficult to achieve explosive growth in the short term. At present and for some time to come, China’s rare earth industry policy will gradually tighten, and rare earth export quotas are difficult to achieve a major breakthrough. Although the quota reduction will stimulate the rise of international quotations, domestic quotations will rise, but the low volume of "quantity" makes it difficult for the rare earth industry to achieve explosive progress.

At the same time, a large amount of foreign capital has entered China. At present, China’s reserves for the US dollar are already quite high, and the annual losses on ** reserves are not a small number. At the same time, the continuous appreciation of *** has raised the expectations of holding ***. . Under the unilateral renminbi appreciation expectation, foreign trading companies are willing to own *** assets, but they are reluctant to hold compulsive liabilities, so that the advancement of internationalization means that China’s ** assets have risen further. Under the background of the medium-term depreciation risk of the U.S. dollar and the global medium-term inflation, the costs and risks of holding too many assets are rising. If rare earths are mass-produced in foreign countries, China can use already high US dollar reserves to purchase strategic resources for rare earths, which can ensure the sustainable development of its rare earth resources and reduce the depreciation of the dollar under global inflation**. Loss.

(The author is an industry analyst of Beijing Shijing Future Investment Consulting Co., Ltd.) (China Economic Herald)