Which Metals Are Impacted By These New Mining Rules?

Mining just got a lot tougher in one key commodities nation this week.

Struggling metals producer India.

The minerals industry is feeling the pinch after a slate of new measures implemented by the government. Which insiders say will raise the cost of mining — potentially impacting production of key commodities here.

The first hit to miners was a raise in mineral royalties. Which was confirmed in India’s parliament last week.

Royalties will now rise nearly across the board. With officials forecasting that the increased rates will grow royalty payments across the country by over 40% — implying an increased tax burden of $2.1 billion for the industry as a whole.

At the same time, a new bill has also been unveiled that would increase miners’ payments to local populations affected by projects. Potentially adding an additional tax burden to operations.

All of which suggests that the cost for winning metal in India is going to rise substantially. Leading to the question — what commodities could be affected?

India is in fact a top-five global producer of a number of key products: alumina, iron ore, chromium and graphite.

As the chart below shows, the amount of worldwide supply that India’s miners put out in these markets is significant.

Screen Shot 2015-03-22 at 7.15.30 PM

Source: USGS

Markets like chromium and graphite are of course more minor globally. But alumina and iron ore are two of the most-traded commodities around the planet.

With India commanding 8% and 5%, respectively, of the production in these spaces, events in the minerals sector here are well worth paying attention to. Watch for news on miners’ reaction to the new tax rules — and any attendant mine shutdowns and reductions in supply.

Here’s to a taxing situation,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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