China Commodities Weekly - China to cut aluminium semis' export tax rebate from 8-11% to 5-8%?

The Shanghai copper price came under downward pressure last week. The front month contract went down to Rmb65,800/t ($8,349/t) by Friday's close, a decrease of Rmb990/t ($124/t), or 1.5% over the previous week.

The aluminium price remained unchanged from last week as the cash month price closed at Rmb20,710/t ($2,589/t) on Friday. SHFE registered aluminium inventories moved up this week by 23% to 21,273t.

Press reports suggest China may cut the export tax rebate for aluminium fabricating products further from the current 8?1% range to 5?% in the near future in an effort to ease Chinese trade surplus and curb the exports of energy intensive products. China cut the aluminium fabricating products exports tax rebate from 13% to 8?1% in September this year.

According to Chinese trade statistics, Chinese October net imports of refined copper were 61,120t, significantly improved from previous month of 46,767t. For the first ten months as a whole, Chinese net imports of refined copper were down by 58% year on year to 430,000t.

Chinese steel analysts are reaching a consensus that Chinese steel mills are getting more rational in adjusting their output to the market fluctuation in 2006. This has important ramifications for next year's Chinese steel market because the capacity that has been built during the heavy investment in the steel industry between 2003 and 2005 will mostly come on-stream in 2006 and 2007.

This week, Chinese hot rolled coil prices hit $414/t ex-Vat, 0.8% higher week-on-week but 2% lower month-on-month. Cold rolled coil rose 0.6% week-on-week but was down 0.6% month-on-month to $514/t ex-Vat. Galvanised steel, however, dropped by 0.4% week-on-week and 1.6% month-on-month to $609/t while rebar prices posted $326/t ex-Vat, slightly lower than last week.

Following recent sharp rises, domestic iron ore spot prices remained stable last week. Annual contract price negotiations for iron ore are beginning, with many domestic steel buyers apparently already conceding that a (small) price rise is likely.