Market Mayhem: China Cancels Tax Rebate on Aluminium Exports
China's Ministry of Finance announced last week that, effective from Sunday the 1st of December 2024, tax rebates on exports of aluminium will end. The announcement sparked what Reuters has described as 'market mayhem', with prices sinking in Shanghai and rising by as much as 8.5% on the London Metal Exchange.
China is the world's biggest producer of aluminium; in 2023, the country produced around 40 million tons of the metal, which accounted for more than half of the entire global output. Over 5 million tons of this came in the form of semi-manufactured products like tubes, sheet and bars, with outbound shipments growing by a record 17% in the first three quarters of this year.
China's shock announcement concerning the cancellation of the tax rebate, which stood at 13%, is likely to have significant impacts on the global supply chain of aluminium in both the short and long term. The elimination of the rebate also applies to copper exports, which total around 700,000 tons per year.
The VAT refund has acted as a 'financial lifeline' for many manufacturers, especially those which work at a smaller scale in this notoriously competitive market. Major players expect a 'sharp drop' in export volumes in 2025 but are hoping for stabilisation as exporters start to 'adjust to a new financial reality'.
Numerous considerations, both domestic and international, appear to have been the motivation behind China's decision. Policymakers in the country have a goal to incentivise the aluminium sector to keep materials in the country, helping to ensure self-sufficiency. China has imposed a capacity cap on its smelting sector of 45 million tons and, with its national output of primary metal running at over 43 million tonnes a year, there seems to be little potential for further growth.
Trading partners in the west have frequently accused China of operating damaging trade practices and unfair subsidies. The country has recently been in talks with the EU, which has imposed tariffs of up to 45% on electric vehicle exports from China. Donald Trump, who is set to lead the new administration in the USA, has threatened to impose import taxes as high as 60% on Chinese products being imported into the USA.
The bottom line is that all aluminium prices are set to rise significantly, affecting numerous industries. As a supplier of aluminium materials in various forms (including aluminium coil, sheet, rivets, banding, foil and more), BS Stainless will endeavour to keep our prices at the most competitive level in these changing times. If you have any concerns, please do not hesitate to get in touch.
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