China cuts tax to protect its iron ore industry

In more bad news for Australia’s junior miners, the Chinese government has moved to help prop up its high-cost iron ore producers by reducing tax.

China’s State Council said it would reduce the resource tax on iron ore by 40 per cent in order to support the economy.

It will also cut power prices in a bid to reduce business costs.

With the iron price trading at near ten-year lows, it was hoped an exit of the Chinese high-cost miners would see a price rebound.

However the latest move by the Chinese government highlights the lengths it will go to in order to save its industry from being bullied out of the market.

It means that the oversupply which is hammering the price of iron ore is set to stay and will help to keep the commodity trading lower.

Benchmark iron ore for immediate delivery to the Port of Tianjin rose slightly overnight to $US47.90 a tonne.

However the upswing is not enough to help pull junior iron ore miners out of the red and into breakeven territory.

On Tuesday Atlas Iron suspended trading pending a full business review.

UBS estimates that Atlas is losing $US15 for each tonne of ore it mines at current spot prices.

It is also thought other iron ore miners including BC Iron, Mt Gibson and even Fortescue Metals Group are all loss-making with the price of iron ore this low.

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