China Unlikely To Remove Lead, Aluminum Export Taxes - Barcap

China's latest tariff changes on a wide range of commodities demonstrate the Chinese government's firm stance toward the export of energy-intensive goods, including aluminum, Barclays Capital said Tuesday.

"In the latest round of tariff changes on a wide range of commodities, the Chinese government has shown that its policy stance toward exports of energy-intensive goods, including aluminum, remains unchanged, despite the current operating difficulties of domestic producers," Barclays Capital said in a research note.

Amid China's slightly better-than-expected commodities trade performance in November were hidden signs Beijing is reluctant to alter long-standing policy goals just so it can lend support to slackening exports of key base metals.

For about a month, market participants speculated the government was poised to remove export taxes on lead, primary aluminum and aluminum alloys, among other measures to rescue flagging smelters and curb falling prices.

But some analysts pointed out Beijing still regards lead as the product of an inefficient and environmentally undesirable output. Also, they said the government's long-term policy was to discourage the export of power-intensive products, including aluminum.

The Barclays evaluation of the evidence agrees with these analysts.

In November, China remained a small net importer of primary aluminum, and alloy net exports fell 38% on month, continuing a trend in place since export tariffs were put in place in August. Aluminum semifinished net exports fell 42% on month.

Nevertheless, "the 15% export tariff on primary aluminum is set to remain in place, and the government will be making amendments to the categorization of some aluminum products with the aim of better controlling low-value added semis exports disguised to be exported in different forms," Barclays said.

The tax regime on refined lead exports is also likely to stay intact, it added.

Chinese refined lead has been trading at a premium of $460 a metric ton this month to London Metal Exchange prices, up from $120/ton in November.

"Rather than reflecting a significant recovery in local demand, the relative strength of domestic prices has been supported by market rumors earlier this month about a cancellation in refined lead export tariffs - which have recently been dispelled by official announcements that the 10% tariff would remain," the note said.

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