China May Cut Export Tax On Lead, Aluminum; Analysts Divided

China may eliminate export taxes on refined lead and reduce them on primary aluminum and aluminum alloy, analysts said Friday.

But industry sources are divided on the likelihood of Beijing enacting these policy changes.

Some say the prospect is weakened by Beijing's long-term policy to reduce exports from its energy-intensive industries.

The market expects Beijing may cancel the 10% export tax on refined lead to counter sagging domestic demand, Zhu said.

Industry players also expect the government may reduce the export tax on primary aluminum and aluminum alloy to 5% from 15%, effective Jan. 1, Zhu added.

London Metal Exchange lead prices fell more than 7% Thursday to their lowest level since July 2006, on reports China was mulling a reduction in the lead export tax.

Traders were concerned Chinese lead exports would flood an already-poor demand environment.

The sharp slowdown in the Chinese car industry has cut deeply into battery replacement demand, which has in turn softened the demand for lead.

The domestic price premium over LME for refined lead has collapsed from an average of $600 a metric ton in October to $130/ton in November, Barclays Capital said in a note earlier this week.

Zhu said a tour of lead factories last month suggested there wasn't much lead stockbuilding in warehouses.

China plans to cut or remove taxes on the export of some steel and aluminum products from Dec. 1, and raise value-added tax rebates for some copper tube and primary aluminum products.

But other analysts said the tax removal on refined lead wasn't about to happen, in part due to lead's environmental risks.

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