China Resource Tax Expected to Buoy up Tech-Metal Prices in 2015

1. China Resource Tax Expected to Buoy up Tech-Metal Prices in 2015 Last year, the Chinese government made clear its intention to increase Resource tax on technology metals in 2015. The government was considering this option to counter the WTO ruling that Chinese export tariffs and quotas on rare metals violates its WTO obligations. According to Du Shuibling, an analyst associated with Bachman Informat, an increase in resource tax this year would raise production costs and thereby international prices of tech metals. Last year, the World Trade Organization (WTO), acting on a joint complaint put forward by the U.S., E.U., and Japan, issued a ruling that the Chinese export tariffs and quota infringe its trade charter. The Chinese government imposed restrictions on rare metals in 2010 to “limit pollution and prevent over mining its technology metal resources.” However, these trade restrictions provided undue advantage to the Chinese tech companies, according to the complaints filed in the WTO against the government.

2. China had argued that the trade restrictions on the tech metals was allowed under “general expectation” of the GATT’s (General Agreement on Tariffs and Trade), a multilateral trade agreement put forward in 1994 to eliminate trade barriers. The WTO, however, ruled that the minerals in question did not fall under the scope of general exceptions. And, therefore, the trade restrictions violated China’s trade obligations.

3. Chinese Counter Move Would Result in Increased Tech Metal Prices The Chinese government countered by announcing its plans to impose increased tax on the tech metals in 2015. The shift will result in higher cost of extracting the minerals, which the government believes will more accurately reflect the scarcity of these precious resources. Their policy aims to prevent selling of tech metals at cheap prices and thereby conserve the precious resources. The increase in resource tax bill will greatly appreciate international metal prices. The move would significantly change the supply/demand balance. The government believes it will cut illegal trafficking of the tech metals and discourage countries from stockpiling them. The higher tech metal prices would also discourage excessive profits of the tech metal mining companies. In addition, the increased prices would directly hit the metal smelting and other firms associated with processing of the tech metals.

4. Technology Metals Could Prove to Be Investors Gold Mine in 2015 The red dragon’s wrath on technology metals could prove to be a blessing for traders who invest in these precious metals. As technology continues to proliferate the homes consumers, the demand for technology metals is expected to increase in the coming years. Leading the charge would be dysprosium, europium, terbium, neodymium, and yttrium. Chinese new tax along with supply restrictions would be enough to spike their prices in the international market. World demand of these metals is expected to grow by 7% this year. China’s demand alone represents about 34% of the annual global demand. In order to satiate this increasing appetite for technology metals, the supply must increase substantially both from both Chinese and Non-Chinese sources. With the impending increase in Chinese resource tax, tech metals extracted outside China must increase to 50,000 tons per year. Until now, the annual production of tech metals was 20,000 tons per annum. This means that the tech metal extracted from non-Chinese sources must double for the international prices to remain at current levels, which seems highly unlikely at the moment.

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