China is considering cutting taxes for domestic iron ore miners, State media reported Tuesday, as mining firms in the world's top consumer of the ore struggle to compete with overseas rivals.
The Ministry of Industry and Information Technology will work with the Ministry of Finance and other parties on a proposal to cut the current total tax rate of around 25 percent by up to half, the China Securities Journal, a daily newspaper published under the administration of the Xinhua News Agency, reported Tuesday without citing sources.
Domestic iron ore miners have been burdened by high production costs and have failed to compete with Australian miners including Rio Tinto and BHP Billiton, forcing the country's big steel makers to rely heavily on imported ore.
Industry sources estimated that the average cost of producing domestic iron ore, most of which is of a grade as low as 20 percent, ranges between $90-$100 per ton, compared with around $30-$50 per ton for Australian miners.
Restocking by steel mills on hopes China's new leadership will maintain infrastructure spending last week pushed up iron ore prices to their highest since July.
But traders warned that the winter season in the country, which consumes around two-thirds of global seaborne iron ore, would eventually dampen demand as construction normally pauses during the period.
Iron ore prices will be stuck in a downward trend in the coming years, Wang Xiaoqi, vice chairman of the China Iron and Steel Association, told an industry conference last week.
Benchmark iron ore with 62 percent iron ore content was unchanged at $122.80 a ton again Monday, based on data from the Steel Index.
China, the world's top iron ore consumer and buyer, imported 56.43 million tons of the raw material in October, down 13.2 percent month-on-month. The average import price dropped 9.45 percent from the previous month to $104.9 per ton, according to data from Chinese customs.
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