MI ANALYSIS: China's exports of aluminium products down only slightly in July

China's exports of aluminium "product" recorded only a muted month-on-month decline in July despite the authorities' removal of export tax rebates on most such "product". Exports last month were 165,831t in July. That was lower than the record 220,420t exported in June but still the fourth-highest monthly total on record after April, May and June. The removal of the export tax rebate was an attempt to stem the flow of such "product", much of which is no more than first-stage converted material. Exports of this form of aluminium have soared since the imposition of a 15% export tax on primary metal from the start of this year with local players capitalising on the wide export tax differential. Exports of primary have dropped sharply as a result of those January changes to the tax code. The second snapshot of the country's trade data out this morning doesn't provide a breakdown between primary and alloy but on a combined basis net exports of 22,585t were very much in line with the lower range evident since the start of this year. In terms of still-strong exports of "product", it seems more work must be done to close the tax differential. The Chinese authorities have already moved to put an outright export tax on strip and bar—effective the start of August--but since these account for only a small part of "product" exports, it is questionable how effective this will be. Our first take on the July figures confirms our view that the authorities' attempts to clamp down on exports of "product" are mirroring earlier attempts to stem the flow of primary metal. The first steps—the removal of rebates and then the imposition of a 5% export tax—had only a dampening effect. It was only with that January hike to 15% in the export tax that primary exports slowed significantly. We strongly suspect that Beijing will have to move towards equality of tax treatment to achieve a similar success with exports of "product."