China to further increase ferroalloy, tungsten export tax

The Chinese government intends to further increase the export tax on ferroalloy products in the near future, as part of measures to control overcapacity and hasten the elimination of outdated capacity, a governmental official told Interfax yesterday.

An official with the National Development and Reform Commission, who asked to remain anonymous, said the policy was in the final stages of preparation and most ferroalloy product export taxes would be increased from current 10% levels.

The export of ferroalloy products including ferromanganese, ferrosilicon, ferrochromium, ferronickel, ferromolybdenum and ferrotungsten, has been levied at 10% since Nov. 1, 2006.

He stressed that although the policy would be released very soon, a final issue date had not yet been decided.

The market rumour is that the export tax on silicon-manganese will be raised to 15%, while that of electrolytic manganese will be raised to as much as 30%. Silicon-Manganese FOB prices have experienced constant growth since the beginning of March this year, as a result of the market rumour.

The FOB price for silicon-manganese (Mn65Si17) soared to between $1,300 and $1,400 per tonne in China's major ports yesterday, up between 76% and 84% from between $740 and $760 per tonne at the beginning of March.

Although the official refused to comment on this rumour, he emphasized that the government was determined to substantially reduce outdated capacity and curb the current trade surplus through this round of export tax increases.

China's ferroalloy industry is facing severe problems from overcapacity, heavy pollution and out-of-date technology. There are a current total of 1,570 ferroalloy producers in China, capable of producing a combined 22.13 million tonnes of ferroalloy per year. However, only 48% of capacity is currently under operation.

The Chinese government aims to reduce domestic ferroalloy capacity to 17 million tonnes by 2010, down 25% from 2005.

The domestic ferroalloy industry has been recovering from losses since the beginning of this year, caused by the steady rise in downstream steel product prices in the domestic market.

"We've seen significant growth in ferroalloy purchases from steel mills since the Spring Festival. The low stockpiles of manganese ferroalloy products, including silicon manganese and ferromanganese and a tight manganese ore supply, have resulted in rising prices that are expected to continue for the near future," said Wang Xin, an analyst with Custeel, a consultancy affiliated with the China Iron and Steel Association.

Wang said the policy would be released at latest before the end of June, since exports of some types of ferroalloy including ferrosilicon and ferrotungsten saw unexpected high in the first three months, which has stirred up much concern among the central government.

In the first quarter, China exported 1,558 tonnes ferrotungsten, up 16.5% from the same period of last year.

China has charged much higher power prices to outdated ferroalloy mills this year, resulting in higher production cost and increased ferroalloy product prices, she added.

The price of silicon-manganese (Mn65Si17) was RMB 9,300 ($1,211.17) per tonne in China's southwestern regions yesterday. Ferrosilicon was RMB 5,750 ($748.84) per tonne in the northwestern market and ferrotitanium (Ti30) was RMB 13,500 ($1,758.16) per tonne in the northeastern market, according to Shanghai Mysteel.

Wang commented that the new export tax policy would dramatically reduce ferroalloy industry profits and make many small enterprises reluctant to export.

"For example, based on current prices, the export cost of ferrosilicon will increase $40 to $50 per a tonne if the export tax is raised just 5 percentage points," Wang said.
Tungsten

China will further increase the export tax on tungsten products in June in an aim to combat illegal mining and protect scarce mineral resource, an analyst told Interfax today.

China is likely to increase the export tax on ammonium paratungstate (APT), tungsten oxide, tungsten powder and unwrought tungsten products from a current 5% to 10% and increase the tax on ferrotungsten exports from a current 10% to 15%, said Yang Zhaohui, an analyst with Beijing Antaike Information Co. Ltd., a leading consultancy affiliated with the semi-governmental China Nonferrous Metals Industry Association.

Yang added that the government is likely to announce tungsten export tax policies in conjunction with ferroalloy export tax policies.

China is the world's largest tungsten producer and exporter, exporting 5,955.1 tonnes of tungsten products in the first quarter of the year, down 6.4% year-on-year. Exports of tungsten acid, ammonium metatungstate and ferrotungsten increased 182.2%, 71.8% and 16.5% respectively, from the same period of last year, according to statistics released by the China Tungsten Industry Association.

Yang attributed lower tungsten product export levels to China's restrictive export policies. China imposed export taxes varying from 5% to 15% on primary tungsten products on Jan. 1 this year, including APT, tungsten carbonate, tungsten powder, ferrotungsten and scrap tungsten.

The government has also cancelled export tax rebates on tungsten products and banned tungsten concentrate tolling.

Yang commented that domestic tungsten concentrate prices would remain relatively stable in June and July, despite market expectations that China will further increase tungsten export taxes.

The price of Chinese tungsten remained at between RMB 95,000 ($12,389.96) and RMB 105,000 ($13,694.16) per tonne in the first four months of the year, according to information provided by the Jiangxi Nonferrous Metals Industry Administration Bureau.

"June and July are traditionally sluggish months in terms of tungsten consumption in both the domestic and international market. Furthermore, Chinese tungsten miners and processors are maturing in their ability to adjust production to market needs, suggesting that the market will balance even if consumption slows," he explained.

China produced 17,059 tonnes of tungsten concentrate in the first three months this year, down 4.87% from the same period last year. Tungsten concentrate imports were down 18.9% from the same period last year to 1,112.8 tonnes.



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