UPDATE 2-China to cut iron ore tax in new blow to glut-hit prices

jueves 9 de abril de 2015 04:53 GYT
 

* China to halve iron ore resource tax from May 1

* Move is China's first to aid miners hit by price collapse (Recasts, adds comments, detail)

By Manolo Serapio Jr and James Regan

SINGAPORE/SYDNEY, April 9 (Reuters) - China has moved to prop up its struggling iron ore industry by slashing taxes, potentially expanding a global glut and undermining a strategy by mega miners to drive out high-cost competitors.

Brazil's Vale and Australian miners Rio Tinto and BHP Billiton have sought to drive out higher cost and less efficient miners in China, to make way for a flood of new production.

But China's cabinet said on Wednesday that it would cut the tax it collects from domestic iron ore producers by half to 40 percent of the base rate from May 1, acting to help miners that have been chalking up losses as global prices plummet.

"Providing this tax subsidy means the Chinese miners will continue to produce. If that is the case, the strategy of the top three suppliers of pushing high-cost Chinese supply out of business will not work," said Helen Lau, mining analyst at Argonaut Securities in Hong Kong.

Iron ore has been in near freefall for more than two years, dropping 25 percent since February alone to below $50 a tonne last week to its lowest level since The Steel Index .IO62-CNI=SI began compiling prices in 2008.

The action by China shows how despite pledges to slim down inefficient sectors, Beijing appears to be prepared to do what it can to keep some domestic miners afloat.   Continuación...