Iron ore companies may have different attitudes towards tax cuts

Recently market rumors that domestic iron ore mining companies tax reduction program has been completed, once approved, it is expected to achieve iron ore enterprises comprehensive tax negative rate of 25% on the basis of reduction of 10-15 percentage points.

Industry insiders have different attitudes towards this policy. Supporters believe that the implementation of this policy can help the miners to "reduce their burden." While the mine has certain competitiveness, the output will increase, which will reduce the degree of foreign dependence. However, there are also dissident stakeholders, saying that the tax reduction policy is difficult to change the situation facing steel mills and mining companies.

Domestic mining companies: survival is difficult to maintain

China's iron ore is dominated by lean ore, and most of them are buried underground. The high mining costs, coupled with a comprehensive taxation rate of 25%, put pressure on the mining enterprises. According to industry insiders, the cost of domestic iron ore is significantly higher than that of foreign mines. 30% of the domestic iron ore production costs are higher than 100 US dollars, while the cost of foreign mines is only around 80 US dollars. In early September, the major foreign minerals in the market fell below US$80/tonne. According to the current domestic mining company's mining costs, in the face of this price, most iron ore enterprises will be difficult to survive.

Wang Xiaoqi, vice president of the China Iron and Steel Association, bluntly stated at the “2012 My Steel Ores Annual Meeting” on November 15th that the growth in China’s iron ore demand is slowing and supply is increasing. “Iron ore prices are Steady middling is a major trend." Industry insiders predict that the average price of iron ore will fall to US$110-130/t between next year, and the average annual price in 2011 will be US$167.4/t.

The performance of the iron ore market is not satisfactory, and the overall taxation rate has been continuously rising. Various mining enterprises have been pressured to be difficult to breathe.

Dr. Xie Sanming from the Ministry of Industry and Information Technology of the People's Republic of China Ministry of Industry and Information Technology, said that the burden on the current domestic mining companies is not light. “For example, the mine's fuel consumption tax, no ore must be handed over; 2009 iron ore value-added tax from 13% increased to 17%; resource tax increased by 33% in recent years."

According to Xie Sanming’s introduction, when he investigated the Hebei mine, the tax burden on iron ore concentrate was 21.67% in 2009 and increased to 26.23% in the first half of this year. Therefore, he called for a "lightening" of domestic mining companies.

Tax reduction is expected to reduce the dependence on foreign mines

Xie Sanming stated that “If we reduce the burden on mines, we can make the mines more competitive, domestic iron ore production will increase at a faster rate, and the degree of foreign dependence will fall. The international iron ore supply and demand relationship may change.”

It is reported that as early as April of this year, Xiao Chunquan, director of the Ministry of Industry and Information Technology Supervision and Coordination Office, publicly stated that the Operational Monitoring and Coordination Bureau and the China Iron and Steel Industry Association have obtained unanimous opinions on alleviating the burden on mining companies, and will soon start to reduce the burden on domestic iron ore enterprises. jobs. The comprehensive taxes and fees of domestic iron ore enterprises accounted for 70% of sales revenue, much higher than Australia and Brazil. “This is not conducive to the development of the steel industry,” said Liu Qiang, deputy general manager of Siping Hyundai Iron and Steel Co., Ltd.

Xiao Chunquan also believes that "the direct cause of the difficulties in the iron and steel industry is the high cost of ore." In recent years, China has always maintained its position as the world's largest importer of iron ore, and its high degree of foreign dependence and its high price tend to be a major factor affecting the efficiency of steel companies. He introduced that "the domestic iron ore enterprises' tax burden will be reduced by 1 yuan each. According to the 60% dependency ratio, foreign iron ore mines will be forced to spend 1.5-2 yuan less, and domestic iron and steel enterprises will be able to obtain benefits of 2.5-3 yuan. And affordable." According to Xiao Chunquan's analysis, compared with the burden reduction effect of other fields, the reduction of burden on iron ore enterprises has the effect of “doing more with less,” and “the burden of other enterprises is only changing the distribution of enterprises, individuals, and governments, and the total wealth has not increased” and “reduced. The burden of domestic mining companies, such as taxes and fees, will allow the mines to have a certain degree of competitiveness, and the production will increase, which will reduce the degree of foreign dependence and reduce the price, so it will not spend so much money.

Difficult to change the status of steel mills and mining enterprises

"If you just stand on the perspective of corporate burdens, there is some truth in tax deductions for iron ore enterprises," some analysts said. However, judging from China's current actual situation, what the mine companies are facing is not merely The problems of overburdening and reducing burdens, serious overcapacity in the iron and steel industry, and unreasonable iron ore pricing mechanism may be more central and critical issues.

In addition, industry sources directly stated that due to the poor quality of domestic iron ore, it means that it still needs to rely heavily on imports. In the long run, reducing costs through tax cuts may only mean that prices will fall, which will lead to a drop in steel prices. The situation faced by steel mills and mining companies may not improve in comparison with the current situation.