China to impose rare earth tax, rare earths prices jump 9X, ETF to use

Hybrid cars and iPad future owners should take notice, the Chinese Ministry of Finance and the State Administration of Taxation have announced that China will impose a tax on rare earth minerals starting April 1. The rate will be US$9.1 per tonne for light earths, and $4.55 for medium and heavy rare earths.

China Daily reports that Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co, the country's leading rare earth producer estimate the tax would increase the company's production costs by about 720 million yuan this year.

China's export of rare earth metals habe broken $100,000-a-ton, or 9 times what it was a year earlier. In July last year, when each ton cost only $14,405 on average.

"The explosion in export values has coincided with a collapse in volumes coming out of China - the source of almost all the world's rare earth supplies - which has cut export quotas of the 17 rare earth metals and raised tariffs on exports.

China's actions have infuriated its trading partners but lifted the shares of the few mining and prospecting companies outside the country. Those include the US miner Molycorp Inc, Canada's Rare Element Resources Ltd and Neo Material Technologies Inc, and Australia's Arafura Resources Ltd and Lynas Corp."

The ETF for rare eaths is REMX, which we reported on this post February 28.

Here is the updated chart, that's quite a rebound post Japanese earthquake: