MI ANALYSIS: China’s aluminium exports still soaring…just in a different form

The well-documented attempts by the Chinese authorities to restrain the export of aluminium—exports are viewed as a waste of the country’s power resources—have succeeded at one level but failed completely at a different level.

Up until very recently, the focus of Beijing’s wrath and of the rest of the world’s concern—were sustained high exports of primary metal.

As the chart below shows very clearly, a couple of sharp hikes in the export duty on primary metal—now at 15%--has done the trick.

Although April brought no repeat of March, when the country turned to net importer of primary metal, at a low 11,778t net imports were in keeping with the sharply reduced figures that have been evident since the start of the year—when the latest increase in the export tax came into effect.

So far so good, but by keeping a tax break on exports of aluminium product in place, the Chinese authorities have simply caused the flow of metal to be displaced into a flow of products, which still qualify for significant export tax rebates—anywhere between 8% and 11% depending on what sort of product it is.

As a result, exports of product—and there seems to be quite a lot of latitude as to what the country’s customs department will classify as a “product”—have rocketed. They hit a fresh monthly record of 196,710t in April, while cumulative exports over the Jan-Apr period at 605,022t were almost double the year-earlier figure.

As this chart shows, while primary metal exports are now running below those of alloy on a consistent basis, exports of product have just exploded.
In other words, the country remains a huge exporter of aluminium, just not in the form of primary metal.

For several months now Beijing has been widely expected to close the yawning gap between how it taxes primary metal and how it taxes product and it was a surprise that aluminium did not feature on the long list of commodities subject to tax changes in June that was published by the Ministry of Commerce on its website earlier this week.

Our best guess is that there are still arguments raging over what are genuine value-added “products” and therefore liable to preferential treatment—at least in the Chinese government’s eyes--and what are not and therefore liable to the same sort of export tax that applies to primary metal.

However, until this issue is resolved, there is no reason to conclude that exports of “product” will not continue their recent stellar ascent.