China aluminium product exports seen down on rebates

China's exports of semi-finished aluminium products may fall in the second half if Beijing lowers tax rebates, which could cut consumption of primary aluminium, industry officials said on Wednesday.

China, the world's top producer and consumer of aluminium, is considering reducing tax rebates on exports of aluminium tubes, plates and strips to 5 percent, from 11-13 percent, in June, industry officials said.

Lower rebates could hurt Aluminum Corp of China Ltd <2600.hk> <601600.ss>, which is the country's top aluminium producer and plans to buy five aluminium fabricating plants from its parent.

"They are considering cutting rebates by 5-7 percent," said a manager at an aluminium fabricating plant in Guangdong, which exports semi-finished products.

Tax rebate for higher value-added product, aluminium foil, might be reduced to 8-11 percent from 13 percent, he said.

"If rebates are reduced, exports of aluminium products could fall 20-30 percent," the manager said. He said that rebates for most aluminium semi-finished products could be completely removed in December.

Beijing is trying to cool investment in the resource-intensive aluminium industry by taking away incentives to export, but so far investment has held up.

Last July, China cancelled tax rebates of 8-11 percent on exports of rod, bar, extrusion, profile and wire that are made of primary aluminium or aluminium alloy.

But exports of aluminium products still rose 50 percent to 1.85 million tonnes last year and increased 22 percent to 310,000 tonnes in the first two months this year as smelters and fabricators increased exports of products that still carry tax rebates.

The Chinese government is discouraging exports in an effort to narrow its trade surplus, and aluminium products are an easy target in that effort.

Since last week, the state-controlled China Nonferrous Metals Industry Association has stopped issuing certificates for exports of aluminium plate, strip and foil to Turkey after an aluminium industry body, or TALSAD, in Turkey complained about large inflows of the Chinese products, according to a circular posted on the Chinese industry body's Web site(www.chinania.org.cn).

Fabricator sources in China said the certificate was required if importers want to obtain preferential duties for products entering Turkey.

A sales manager at one large aluminium smelter in central China said the government was aiming to chop exports of low value-added products and of products made from primary metal.

Chinese exporters had increased outflows of tube made of primary aluminium after South Korean customs agreed to reduce the import duty to the same level as for primary aluminium ingot late last year, traders in China and South Korea have said.

But industry officials in China said the Chinese customs had tightened controls over exports of tube made of primary aluminium over the past few weeks and classified the tube as primary aluminium ingot, which is subject to a 15 percent export tax and does not carry a rebate.

More than 20,000 tonnes of tube that were scheduled to leave China in March had been returned to smelters for remelting into ingots and would be sold in domestic market, they said.

But fabricators were unwilling to build stocks of primary aluminium ingot since they were not keen to take new export orders on expectation of rebate changes, a trade manager at a large smelter said.