Ministry of Finance cuts domestic iron ore to three major mines

The import of iron ore has undergone an epoch-making year—the era of iron ore annual negotiations has ended, and iron ore sellers are controlling prices on a quarterly basis.

Recently, the reporter was informed that at the same time that the steelmaking negotiating alliance under the leadership of the China Iron and Steel Association was unable to resist the ore monopoly, the Ministry of Finance is studying the tax deduction policy to reduce the cost of domestic iron ore mining and make the domestic ore a new pillar for ore supply. In order to withstand the monopoly of three iron ore sellers (Rio, BHP Billiton, Vale).

However, experts in the industry have analyzed that the benefits of domestic iron ore tax cuts will benefit most small and medium sized steel mills. However, for large domestic iron and steel enterprises that have always “eaten” imported ore “fine grain”, how they are in the mine? In the context of the declining tax market, the “coarse grain” of domestic iron ore is facing challenges.

Ministry of Industry and Finance, Ministry of Finance to rescue the market

“The Ministry of Finance is studying the VAT deduction policy for iron ore and reducing iron ore taxes.” Lu Ye, director of the Investigation and Research Department of the China Mining Association, told reporters, “The current preliminary opinion is to list the cost of underground mine exploitation. Into the deduction area, this can greatly reduce the taxation of mines and reduce the cost of domestic iron ore."

The Lu industry is one of the experts involved in the formulation of this policy. A director of the Ministry of Finance, who declined to be named, told reporters that the policy was formulated to resist international monopoly.

It is understood that at present, China's iron mines have higher mining costs than Australian iron mines. “Foreign mines see mines at some 30 meters, and even 100 meters are very deep, but the shallowest ones in China are also 100 meters or more, and there are no ores about 100 meters. Most of them are 300 meters, 500 meters, and 700 meters. Deep mining costs are high,” said Lu.

On January 1, 2009, the state adjusted the taxation and imposed a fuel tax, which further increased the burden on mines and corporate tax rates. The domestic mines are faced with the burden of value-added tax, resource tax, fuel tax, comprehensive mining conditions and processing costs. The cost of domestic iron ore mining is much higher than that of imported iron ore.

In August 2009, the Ministry of Industry and Information Technology entrusted the China Mining Association and Lu Ye to authorize themselves to carry out surveys and studies on the tax rate and status of metallurgical and mining companies in order to fully understand the current tax burden and development status of metallurgical mines and seek reasonable Solutions to reduce domestic iron ore mining costs.

Lu Yezhi introduced that the Ministry of Industry and Information Technology always supports reducing the cost of domestic iron ore mines. They believe that ensuring the supply of domestic iron ore can reduce the impact of excessive dependence on imported iron ore on China's economic security.

Initially, Lu was given the hope to directly reduce the value-added tax, "but the Ministry of Finance made it clear that this is impossible." Lu said. So Lu proposed to supplement and improve the policy of the value-added tax of mine enterprises, and to increase the scope of VAT deductions and increase deductible items to reduce the burden on metallurgical mines. "Ministry of Industry and Information, Ministry of Finance and Taxation officials agreed basically."

According to expert analysis, the cost of domestic iron ore mining is around US$180/ton. At present, the price of imported iron ore is 160 US dollars/ton.

Big steel plant "changes"

Chen Yong, an iron ore trader, was originally a domestic iron ore trader. “Since 2009, the cost of mines has increased, which is higher than that of imported mines. Some mines have simply stopped working, so I had to move from mine traders. Turn to import iron ore trade." He said.

After Chen Yong became an import iron ore trader, he almost did everything from hoarding ore, reselling, and taking low-price long-term coal mines to the cash market transactions and other common businesses in the industry. These businesses are also banned by the China Iron and Steel Association. The Steel Association has repeatedly stated that it is traders that are pushing up the price of ore.

It's not just Chen Yong who "repents".

"Anshan Iron and Steel and other large steel plants, they have their own mines but rarely mining, but also because of the reasons for rising costs." Chen Yong told reporters.

Lu Yeh also confirmed this to reporters. “The high cost of domestic iron ore mining has a great impact on Anshan Iron and Steel. Usually, Anshan Iron and Steel owns several ten million tons of its own iron ore, but most of it is now mined. The business is shut down."

A person who has just returned from the Anshan Iron and Steel Research Institute also confirmed to the reporter that the Anshan Iron and Steel Mine has been shut down in a large area.

This reporter learned that on March 11th this year, the iron and steel mine expansion and expansion project of the Angang Old District was formally approved by the Ministry of Industry and Information Technology. According to the plan, in 2015, the annual output of the iron ore ore will reach 62 million tons and the output in 2020 will reach 92 million. Tons, the Ministry of Industry and Information Technology pointed out in the approval: “An iron and steel mine expansion and expansion planning project in the old Anshan Iron and Steel Co., Ltd. is conducive to suppressing the price of imported iron ore and safeguarding the strategic safety of the steel industry. It is very necessary.”

Tax reduction is more advantageous for small steel mills

"I strongly support the reduction of domestic iron ore taxation policies." Wang Dayong, secretary general of the Hebei Metallurgical Association, resolutely stated to reporters: "This can counterbalance imported iron ore."

According to Wang Dayong, imported iron ore was at a high level not long ago, so it is profitable to start working on individual iron ore mines in Hebei. "The price of iron ore has dropped sharply in recent days, leading to a drop in the overall market price. Due to the high cost of domestic iron ore mines, it may be affected."

“In the long run, if domestic low-grade iron ore can improve itself in terms of development and utilization, technological progress, and comprehensive utilization of associated minerals, then domestic iron ore is still very promising,” said Wang.

In addition, even if the Ministry of Finance cuts taxes to help domestic mines to fight price wars, the "gastric" problem of large steel plants is also a major challenge.

“The quality of domestic ore is very low. It doesn’t make much sense for our steel mills.” Baosteel officials told reporters, “Blast furnaces in big steel mills are based on 'eating' Australia's high-grade ore, and when designing This is already the case. It is very difficult to get used to 'eat' domestic coarse grains, at least not as a daily staple food."

The above-mentioned sources stated that “reducing the tax burden on domestic mines can only be said to be more favorable to small and medium-sized steel mills.”

It is understood that in 2010, the domestic dependence on iron ore is already close to 70%.

Recently, domestic steel prices and iron ore prices have fallen sharply. “The ex-factory prices and market prices of steel products have gone upside down.” The aforementioned person from Baosteel told reporters: “The market sentiment is bearish.”

It is understood that domestic retail iron ore prices fell from US$185/tonne to US$160/tonne within a week. This is very detrimental to the start of domestic mines, "I hope the policy can be timely rescue." Wang Dayong said.