MI ANALYSIS: China moves again on aluminium export taxes

The Chinese authorities have moved again on the tax code covering exports of aluminium “product”. The government has already announced it is removing export tax rebates on a host of products with the exception of the likes of foil, effective the start of this month. Now the country’s Ministry of Finance has said it will impose a 15% export tax on exports of rod and bar with effect from Aug 1. This is part of the long-running game of cat and mouse between Beijing and the country’s aluminium players. The government is committed to consolidation in the aluminium production sector and to cutting exports of aluminium, both to achieve this and to bring down its soaring trade surplus with the rest of the world. The hike at the start of this year of the export tax on primary aluminium to 15% seems to have stemmed the tide of metal flowing out of the country. But it has simply been displaced into exports of “product” and we use the word cautiously, because a lot of that “product” is first-stage converted metal designed to get around the primary aluminium export tax. Exports of “product” have rocketed this year, the latest figures showing shipments almost doubling to 1.022 million tonnes in the Jan-Jun period. It remains to be seen what impact the removal of rebates and now the imposition of a 15% tax on some product will have. Local reports suggest that rod and bar are not the big problem. However, we view the latest move as a marker being put down for the future. We suspect that only when export taxes are fully brought into line with that on primary metal will the authorities see their attempts to control the sector start to bear fruit. The Ministry of Finance has also announced a cut in the import tax on primary aluminium with purity of less than 99.5% from 1.0% to zero. That was widely anticipated and is expected to have little impact on the country’s trade figures since it remains a net exporter of the light metal, albeit in changing form.