MI ANALYSIS: China’s primary aluminium exports low, products high in May

The full Chinese trade report for May confirmed what we and others had inferred from the early snapshot.

The country’s net exports of primary metal remained low at 8,617t with cumulative net exports over the Jan-May period down by 87% year-on-year at 28,848t.

Exports of alloy stayed relatively solid at 31,804t in May, although they eased by 8.2% year-on-year over the Jan-May period. However, the country remained a significant net exporter to the tune of 80,311t in the five-month period.

Exports of aluminium “product” remained super-strong at 195,840t, just off the pace of April’s record 196,710t. Cumulative exports over Jan-May 2007 were 801,365t, compared with 408,050t in the year-earlier period.

The recent surge in exports of “product” has been caused by the differential between the tax treatment of such product and that of primary metal. Since January the latter has been hit with a 15% export tax, while product has still qualified for tax rebates ranging from 8% to 11%.

The authorities have just moved to narrow that differential by removing the rebate on most products with the exception of high value-added strip and foil.
It now remains to be seen how much impact this has on the country’s trade. The market is expecting quite a sharp reduction in exports of product from July onwards, when the new export tax code becomes effective. However, ‘we’d caution that there may be a lesson to be learnt from primary metal exports.

These too saw the rebate removed as a way of stifling exports but after a temporary blip exports remained strong until Beijing imposed first a 5% outright export tax and then lifted it aggressively to 15% at the start of this year.