China to Take Tough Line on Aluminum Product Exports Next Year

The Chinese government will release further policies restraining aluminum product exports next year in order to both curb the country's huge trade surplus and cool overheated investment in the aluminum fabrication sector, an industry official told Interfax at the 2007 China Aluminum Forum, held in Chengdu Thursday. 

"The central government is in the process of formulating a policy to control aluminum product exports, as the current export tax and value-added-tax (VAT) export policies for semi-finished aluminum products have led to significant growth in aluminum plate and aluminum foil exports, causing much concern to governments both at home and abroad," Wen Xianjun, director of the China Nonferrous Metals Industry Association (CNMIA), said.  

China canceled VAT rebates for the export of semi-finished aluminum products in eight tax codes, including aluminum bar, wire and profile, on July 1 this year, and levied a 15 percent export tax on those products on Sept. 1 this year. However, aluminum foil and aluminum tube exports still retain a 13 percent VAT rebate, and there is an 11 percent VAT rebate on aluminum strip and plate exports. 

Wen commented on market rumors that China may increase the export tax for some semi-finished aluminum products, and reduce the VAT rebate for aluminum plate and aluminum foil exports, by saying that although the government is looking into a way of reducing the trade surplus, the CNMIA has advised Beijing to keep the current 13 percent VAT export rebate for aluminum foil, as it is the sector's highest value-added product to date.   

Wang Weidong, an analyst with Beijing Antaike, a CNMIA-affiliated consultancy, told Interfax that the current export tax policy for aluminum foil and aluminum plate only encourages investment growth in the sector, exacerbating overcapacity and excessive export problems.  

China became the world's largest aluminum foil producer in 2006, reaching a capacity of 1.25 million tons per annum, and producing 750,000 tons over the year. The country's aluminum plate capacity reached 4.1 million tons in 2006, with production topping 2.85 million tons.  

"By 2010, we expect China to reach an aluminum plate capacity of 6.8 million tons, and an aluminum foil capacity of 1.86 million tons," Wang said.   

In light of ever-increasing production, domestic producers have been forced to increase exports in order to alleviate domestic oversupply, with net aluminum foil exports reaching 120,000 tons in 2006.  

However, the Chinese government's decision to impose a 15 percent export tax on primary aluminum and aluminum alloy at the end of last year has only shifted the focus of exports from primary aluminum to fabricated aluminum products. China exported a total of 1.439 million tons of aluminum products in the first nine months of this year, up 66 percent year-on-year, while exports of primary aluminum and aluminum alloy plummeted 57.1 percent to around 413,000 tons.  

Stefan Glimm, executive director of the European Aluminium Foil Association told Interfax at the conference that the significant growth of Chinese aluminum foil exports, which enjoy government subsidies, has caused injury to European producers.  

Glimm further commented that aluminum foil is the second most energy-intensive product after primary aluminum, as the foil must be rolled several times, consuming large amounts of energy. "Exports of Chinese aluminum foil eventually lead to exports of energy from China, which is in conflict with Chinese environmental policy that aims to curb energy-intensive production," he claimed.  

Wen from the CNMIA predicted that "although domestic primary aluminum consumption is supported to some extent by aluminum product exports, we will still see a primary aluminum surplus this year of nearly 200,000 tons."   

China's apparent aluminum consumption grew 46 percent year-on-year in the first nine months of this year, but consumption growth is expected to slow in the fourth quarter as aluminum product output falls in response to reduced exports since July, Wen said. 

The CNMIA forecasts that China will consume 11.9 million tons of primary aluminum this year, up 37 percent from last year, with domestic primary aluminum production reaching approximately 12.4 million tons.  

China's hard line on aluminum and aluminum product exports has led to oversupply in the domestic market, and tight supply in the international market, resulting in the price of aluminum futures on the Shanghai Futures Exchange (SHFE) falling below the London Metal Exchange (LME) benchmark three-month aluminum price.

"As long as China continues to release restraining export policies for aluminum products, I fear that the price gap between domestic and international markets will only get bigger over the following year," a Shanghai-based aluminum product physical trader told Interfax at the conference. "Moreover, aluminum product exports will continue to increase as long as the price gap is large enough to offset any increase in export tax or reduction in VAT rebate."

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.