SHANGHAI, Nov 20 (Reuters) - China is considering cutting taxes for domestic iron ore miners, state media reported on Tuesday, as mining firms in the world’s top consumer of the ore struggle to compete with overseas rivals.
The country’s Ministry of Industry and Information Technology (MIIT) will work with the finance ministry 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 reported, 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 steelmakers 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 tonne, compared with around $30-50 per tonne for Australian miners.
Restocking by steel mills on hopes China’s new leadership will maintain infrastructure spending had pushed up iron ore prices to their highest since July last week.
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 & Steel Association told an industry conference last week.
Benchmark iron ore with 62 percent iron ore content .IO62-CNI=SI was unchanged at $122.80 a tonne again on Monday, based on data from information provider the Steel Index. (Reporting by Ruby Lian and Fayen Wong; Editing by Joseph Radford)