A Comprehensive Guide To Understanding The Impact Of China's Adjustment And Cancellation Of Export Tax Rebates
Nov 16, 2024
A Comprehensive Guide to Understanding the Impact of China's Adjustment and Cancellation of Export Tax Rebates
The Ministry of Finance and the State Taxation Administration have announced adjustments to export tax rebate policies. Starting December 1, 2024, export tax rebates for aluminum products, copper products, and certain chemically modified animal and vegetable oils and fats will be canceled. Additionally, the export tax rebate rates for certain refined oil products, photovoltaic products, batteries, and non-metallic mineral products will be reduced from 13% to 9%.
From an international market perspective, China is a major exporter of aluminum and copper products. The cancellation of export tax rebates will reduce the export incentive for Chinese copper and aluminum products. Previously, sanctions by the London Metal Exchange (LME) on Rusal have caused supply shortages in the overseas aluminum market. A reduction in China's aluminum exports will further exacerbate this situation, driving up LME aluminum prices.
Domestically, the cancellation of export tax rebates will increase the supply in the domestic market, meaning future consumption of copper and aluminum products will rely more heavily on domestic demand. The policy may lead to an acceleration of exports for aluminum and copper products before the end of November, providing a short-term boost to downstream consumption. However, over the long term, this change could significantly impact the export of related products. As primary processed products lose competitiveness, there might be a gradual shift toward exporting finished products, making it important to monitor the export trends of other related goods.
According to customs data, the 24 aluminum product categories affected by this policy had a total export volume of approximately 4.62 million tons from January to September 2024, accounting for 99% of the country's total aluminum product exports. In 2023, China exported approximately 5.166 million tons of these products, with an export value of about $17.74 billion, representing 98% of total aluminum product exports.
The cancellation of export tax rebates on aluminum products will, to some extent, increase the export costs for aluminum product exporters. This will impact the export enthusiasm of aluminum processing companies, especially those focusing on aluminum profiles and aluminum sheets, strips, and foils. In the short term, the tax rate adjustment may prompt businesses to expedite export orders, causing a brief "export rush" phenomenon and potentially boosting production levels. However, the likelihood of a surge in orders within the next two weeks remains low.
In the medium to long term, the temporary reduction in China's aluminum export volumes and the increase in export costs could drive up overseas aluminum prices, widening the price gap between domestic and international markets. Assuming no significant currency fluctuations, this widening gap may improve the profitability of domestic aluminum exports, helping Chinese aluminum products regain competitiveness and stabilizing China's aluminum export volumes over the medium to long term.
The optimal strategy at present is to secure spot inventory as soon as possible to mitigate the 13% cost increase resulting from the cancellation of export tax rebates. For details on spot inventory, please contact our sales team promptly to lock in available stock.If you would like to learn more about other detailed export tax rebate policies, please feel free to contact us.
