Rare earths resource tax, page-19

IMHO,

I think the situation with the Chinese RE industry and resource tax may be worse for ROW producers than many would have believed possible (even me), especially if the implementation of the new resource tax is delayed for any length of time !

Reasoning from the fact that the State owned and controlled Chinese domestic RE producers have consolidated and regulations have been implemented to rationalize and further nationalize the RE industry in China. Also since their restrictive actions in the past, have back fired and resulted in wholesale demand destruction for their REEs. I believe the easiest way for the Chinese Government to stimulate their domestic RE industry is - to delay the implementation of this new resource tax. If they did it would likely have two immediate effects -

1.0 Stimulate ROW demand for Chinese REEs by lowering the price by the amount of the old export tax while also stabilizing the domestic price for REEs used in their domestic value adding industries.

2.0 Put the ROW RE producers under even greater immediate financial pressure by using the tax change implementations as an economic weapon against them and also against many ROW value adding industries.

Eventually when they did implement the new resource tax it would then be set initially low enough to stimulate domestic producers and not hinder the domestic value adding industries while still not offering ROW RE producers much joy on RE prices by being at worst price neutral.

Whether these fears for ROW producers becomes reality, will depend almost entirely on the actions of the Chinese government on the resource Tax front in the coming weeks and months.

If they implement the new tax quickly and it's settings are designed to be price neutral or slightly RE price stimulative, then these fears may be regarded as unfounded. However as I post the Chinese RE tax situation does not look so good IMO.......