Asian traders mixed on possible China aluminium export tax cuts

Traders in Japan and South Korea expressed mixed views Wednesday on the likely impact of China possibly reducing its export tax on primary aluminium, in a move to boost the economy.

There is market talk that the Chinese government is studying a possibility of cutting the export tax on primary aluminium to 5% from the current 15%. Traders mostly agreed that the reduced export tax would provide an incentive to Chinese producers to increase their aluminium exports to South Korea and other Asian countries.

Japanese traders said Asia was already oversupplied, adding that additional Chinese exports to the region may discourage demand further. One trader added that some producers were keen to sell to Japan as they see possible increases in Chinese supply.

South Korean traders, however, pointed out that the Chinese metal exports would increase only if the London Metal Exchange prices were higher than the domestic metal prices. Currently, LME prices are lower than the Shanghai exchange prices.

"Shanghai aluminium prices may be reacting to Chinese producers cutting output ... it may not be easy to get Chinese metal next year," said one Korean trader.

Currently, Chinese-origin primary aluminium is quoted at around $30/mt plus LME cash CIF Korea.

If LME prices continue to move lower than the Shanghai prices, there is absolutely no incentive for Chinese producers to export, the trader added.

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