Tax hike in Australia and India may impact Chinese steel mills

15:47, May 04, 2010      

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Both India and Australia, two of world's major iron ore suppliers, announced recently that they will raise export tariffs or taxes on iron ore producers. Steel mills are concerned about the effect this will have on the market.

Indian Finance Minister Pranab Mukherjee announced on April 29 that the government has raised the export tax on iron ore slumps from 10 percent to 15 percent. Meanwhile, the Australian government proposed a new 40 percent tax on the booming profits of resource companies such as Rio Tinto and BHP Billiton.

With the growing production capacity of India's steel producers, its domestic iron ore consumption may jump in the next two years, said Pranab Mukherjee. Analysts pointed out that India's move aims at guaranteeing ore supply for its domestic enterprises.

According to the Indian government's plan for the expansion of steel production capacity, India's crude steel production will hit 124 million tons in fiscal year 2012-2013, more than double its current capacity of 54 million tons.

BHP Billiton, the largest Australian iron ore and coal producer, expressed disappointment toward the taxation raise on its Web site. Current taxation rate is only 2 percent to 10 percent.

Industry insiders noted that because iron ore is in short supply, increased costs from overseas miners may be transferred to iron ore prices, and therefore increase Chinese steel producers' costs.

Australia and India are China's first and third largest ore suppliers, respectively. Statistics from showed that China's iron ore stockpile in the ports was 690 million tons last week.

The cost, insurance and freight (CIF) price of Indian iron ore mines with high deposits of 63.5 grade Fe has reached 190 U.S. dollars per ton, 80 U.S. dollars higher than the three iron ore giants' quarterly contract prices with Japanese and South Korean steel mills.

By People's Daily Online


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