UPDATE 1-China may impose 5 pct tax on aluminium imports

China is expected to reinstate a 5 percent tax on imports of primary aluminium it had cancelled two years ago from March 1, as stocks in the world's top aluminium market balloon, smelter officials and traders said on Monday.

"The tax will be 5 percent," a sales manager at a large aluminium smelter said.

The tax may spur Chinese importers to cancel or delay tens of thousands tonnes of spot primary aluminium due to arrive in coming weeks, traders said.

China produces more aluminium than it needs. But Chinese aluminium prices have surpassed the cost of imports after the State Reserves Bureau (SRB) bought 290,000 tonnes from eight smelters in December as part of a plan to support smelters because of weak demand, spurring merchants and fabricators to import spot metal.

A trader estimated Chinese importers had contracted to import about 40,000 tonnes of spot aluminium for delivery in late February and March.

Rising imports would weigh on Chinese prices and nullify the SRB's effort to support the prices and smelters, smelter officials said.

Smelters, led by state-owned Chinalco, the parent of Hong Kong and Shanghai-listed Aluminum Corp of China Ltd (Chalco) (2600.HK)(601600.SS) had lobbied Beijing to impose a 10 percent tax on the imports, they said.

Chinalco, the country's top aluminium producer, in December sold 150,000 tonnes to the SRB, which is responsible in managing and building the country's metals reserves.

In March, the state body may buy another 300,000 tonnes of primary aluminium as reserves, smelter officials and traders said. [ID:nHKG109895]

"SRB may buy 300,000-500,000 tonnes in March and another 300,000-400,000 tonnes in May," a smelter official said.

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