China's State Council decided on April 8 at an executive meeting presided over by Premier Li Keqiang to cut the resource tax on iron ore by half from 80 percent to 40 percent, effective from May 1 this year.
Since last year, due to sluggish demand and oversupply in the iron ore market, international iron ore prices have slumped. The Xinhua-China Iron Ore Price Index for imported iron ore with 62 percent iron content stood at 48 points as of April 6, almost down 50 percent year on year.
Chinese miners have long been lobbying their government to lower the resource tax on iron ore, as they have incurred losses amid the sharp declines in global iron ore prices. It is estimated that the 40 percent iron ore resource tax is equal to approximately RMB 10-20/mt ($1.6-3.2/mt). The reduction in the resource tax is expected to improve the profitability of domestic miners and also provide a certain degree of support for China's steel industry.