China extends resource tax on domestic sales

China extends resource tax on domestic sales

China has extended a resource tax on domestic sales of crude oil and natural gas from some regions to the whole country and expanded the list of taxable resources to coking coal and rare earths from November 1. The move, billed as a way of conserving resources and limiting environmental damage, is part of a long-awaited tax reform that would enrich the coffers of local governments but slash the earnings of resource companies, such as PetroChina, China National Petroleum Corp and Baotou Steel Rare Earths by billions of dollars each year.

The sales of crude oil and natural gas nationwide would be subject for a tax of between 5% to 10%. A sales tax of 0.40-60 yuan per ton on rare earth ores and between 8-20 yuan a ton on coking coal has also been imposed. The Government has not given details on why there was such a wide range in the tax levied on rare earths but analysts said heavy rare earths, which are more scarce, would likely face heavier taxes. Taxes on other types of coal remained unchanged at 0.30-5.00 yuan per tonne.

China’s resource tax at present is calculated based on volume of production, instead of sales value, which has not allowed local governments to reap the benefits of the surge in energy and commodities prices. “Companies have enjoyed profit margins on the sales of coking coal in China, but it is a scarce resource in China that needs to be protected,” the government said. “Rare earths are also an important strategic resources and its over-exploitation has caused environmental destruction as well as affected the security of future supplies.”



China’s commodity demand remains resilient

China imported the most copper in 16 months in September and iron ore shipments hit their highest in eight months, a sign that heavy fixed asset investment was still powering demand for some commodities. The rise in metal and bulk commodity imports, despite a narrowing trade surplus indicating weaker external demand, suggests that China’s habit of buying on dips would continue and should lend support to prices.

China’s commodity demand has proved to be resilient despite external headwinds, thanks in part to the government’s building of over 10 million houses, power transmission networks, as well as investment in the less-developed central and western provinces. Still, analysts cautioned that the data could be partly distorted by a rush to get goods delivered before the week-long National Holiday in October.

An attractive discount for international over domestic prices would have also encouraged merchants to buy for stockpiling, which means actual consumption could be lower than the numbers suggest. Imports of unwrought copper and semi-finished copper products rose 11.8% from the previous month as importers took spot shipments on improved margins. Global copper prices fell 5.6% in August, followed by another 24% tumble in September, while iron ore prices also fell 5.5% in September.

Polymetal seeks premium listing on LSE, raising $500 million

Russian precious metals miner Polymetal is seeking a premium listing on the London Stock Exchange, raising about $500 million in a move it hopes will catapult it into the FTSE 100 bluechip index and hand it currency for acquisitions. Polymetal, which has a market capitalisation of about $7 billion based on its Moscow-listed shares has announced that it would shake up its structure and transfer its Russian shares and UK securities to London.

The move, opening the miner further to foreign investors, will help it take advantage of acquisition opportunities in conditions that have squeezed smaller producers, says CE Vitaly Nesis. “We expect to have a much more attractive and universal acquisition currency for potential mergers and acquisitions (M&A) transactions,” he said. “In terms of M&A activity, we definitely intend to stay in our key geography, that is the former Soviet Union, and we remain committed to precious metals such as gold and silver.”

The listing plan mirrors measures taken by Russia’s top gold miner Polyus Gold, which bought Jersey-registered Kazakh firm KazakhGold to obtain a premium listing. It will also tip the balance of London’s bluechip index even further towards emerging markets and resources.
Polymetal was Russia’s fourth-largest gold producer and the country’s gest silver producer in 2010. It aims to produce more than 800,000 oz of gold and silver this year, up from 753,000 oz in 2010, and over 1.4 million ounces in 2014.