China plans to cut 13% export tax rebate on copper, aluminium semis

• Move to cap China's exports, boost domestic use
  
  
• Indian copper, aluminium producers may benefit
  
  

China's finance ministry has announced plans to revise its export tax rebates on aluminium and copper semi-finished products from 13% to 0%, effective 1 December 2024. This move, part of China's broader economic and industrial strategy, aims to reduce reliance on exports and support domestic consumption.

What are Chinese export tax rebates?

Chinese export tax rebates are government subsidies that reduce the tax burden on goods being exported. These rebates made Chinese aluminium more competitive in global markets, as they allowed exporters to offer material at lower prices, making it more appealing to international buyers.

By removing these rebates, China is effectively making its aluminium exports less competitive.

The announcement sparked a rise in aluminium prices on the London Metal Exchange to over $2,700/t, as the market expects a potential reduction in the outflow of Chinese aluminium to international markets.

A market participant commented, "An increased tax burden on China's metal exports is expected to drive significant gains in global aluminium prices."

China's aluminium exports 2021-24 (till Sep'24)

China's aluminium exports from 2021 to September 2024 (finished flat, finished long, and semi-finished) have shown notable fluctuations across different product categories. In 2021, total exports reached 5.62 million tonnes (mnt), with finished flat products leading at 4.46 mnt. The following year, exports increased to 6.61 mnt, driven by a rise in the finished flat volume to 5.19 mnt. However, in 2023, total exports declined to 5.68 mnt, with finished flat shipments dropping to 4.25 mnt. As of September 2024, exports are projected at 4.91 mnt.

Overall, exports to India amounted to around 0.30 mnt in 2021-2022 and 0.29-0.30 mnt in 2023.

China's aluminium semi-finished imports experienced notable variations between 2021 and 2024 (till September). In 2021, imports totalled 2.74 mnt. This figure declined to 1.95 mnt in 2022, before rebounding to 2.68 mnt in 2023. By September 2024, imports slightly decreased to 2.44 mnt, reflecting a potential uptrend.

China's copper exports 2021-2024 (till Sep'24)

China's copper product exports have shown steady growth from 2021 to September 2024 (finished flat, finished long, and semi-finished). In 2021, total exports touched 0.93 mnt, with finished flat copper products accounting for 0.57 mnt. The following year, export volumes edged down to 0.92 mnt, with a slight rise in the finished flats' share to 0.59 mnt. In 2023, exports increased to 0.96 mnt, driven by a rise in semi-finished products, which stood at 0.28 mnt. As of September 2024, total copper exports are projected to reach 1.03 mnt, with continued growth in semi-finished products to 0.42 mnt and a slight rise in the finished longs' share to 0.13 mnt.

Overall, exports to India amounted to around 0.04-005 mnt in 2021-2022 and 0.05 mnt in 2023.

A prominent player in India stated, "This adjustment could increase the cost of imports for Indian consumers, making domestic products more attractive. Additionally, we might observe a decline in China's imports of aluminium products, as domestic material is prioritised over exports due to cost advantages."

Indian manufacturers stand to benefit

Indian manufacturers, including Hindalco, Vedanta, and Nalco, will be able to significantly benefit from China's cancellation in export tax rebates for aluminium and copper. This policy change will likely make Chinese exports more expensive, prompting global buyers to seek cost-competitive alternatives. Indian producers, with their competitive pricing and growing production capacities, could capture this shift in demand, leading to increased sales and a stronger market share, both domestically and internationally.

Outlook

The tax cut rate of Chinese aluminium and copper will likely increase import costs for the Indian automotive, electronics, and construction industries. This could disrupt supply chains and raise production costs.

However, it also presents an opportunity for Indian producers to gain market share, as Chinese products will become more expensive. Domestic aluminium and copper manufacturers may benefit from growing demand, both locally and internationally.