17 Nov 2009 07:49

China may reinstate lead, zinc and silver tolling

Shanghai. November 16. INTERFAX-CHINA - Chinese government may reinstate lead, zinc and silver tolling as in early as December 2009 to give the country's metal trade a shot in the arm, an industry insider said on Nov. 14.

"Chinese companies are investing more in overseas minerals, including lead and zinc mines. But it has become unprofitable when these companies import concentrate produced from their mines abroad and then export the refined metal because without tolling they have to pay a 17 percent (Value-added tax) VAT on their products," Feng Juncong, an industry analyst with Beijing Antaike Information, said at the Shanghai Lead and Zinc Summit in Shanghai.

"It is expected that the Chinese government will reinstate the tolling business for lead, zinc and silver in early December 2009 or January 2010. Many lead and zinc mines contain silver," Feng said.

China Minmetals Corp., the country's largest metals trader Corp., bought several base metal operations in Australia in June 2009, including the world's second largest open pit zinc mine, Century from OZ Minerals, as well as two other mining projects - Golden Grove and Rosebery. Shenzhen Zhongjin Lingnan Nonfemet Co. also acquired 50.1 percent in Perilya Ltd., an Australian listed lead and zinc miner in February 2009.

"In the next few years, silver will be traded more actively as a metal commodity because the Shanghai Futures Exchange has been preparing to launch a silver contract," Feng said.

Tolling is a trade practice whereby raw materials are imported and processed into finished products for export. Tolling imports and exports enjoy favorable tax policies.

Allowing tolling would enable domestic smelters to import lead and zinc concentrates and export the refined lead and zinc tax free.

However, Wang Jianjun, the import and export department manager with Zhuzhou Smelter Group Co. Ltd., told Interfax on Nov. 16 that he does not see the policy being instituted for at least three years as tolling would boost energy-intensive metal exports that China has strict restrictions on.

Wang said that Chinese companies with overseas lead and zinc mines usually sell back the concentrate they produce abroad to China, similar to what foreign countries do, and they don't receive any preferential policies.

China reinstated copper, nickel cobalt and aluminum tolling on Feb. 1. However, China Nonferrous Metals Industry Association (CNMIA) officials previously told Interfax that the government may only issue tolling import quotas to several smelters.