On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued the Announcement on Adjusting the Export Tax Rebate Policy. Specifically, it includes the cancellation of export tax rebates for aluminum, copper and chemically modified animal, plant or microbial oils and fats; The export tax rebate rate for some refined oil products, photovoltaic products, batteries and some non-metallic mineral products will be reduced from 13% to 9%; Effective from 1 December 2024.
I. Status quo of China's copper and aluminum exports
In terms of copper, customs data show that China's total exports of copper in 2023 are 678,500 tons, and the total exports from January to September 2024 are 612,300 tons. There are about 34 kinds of copper products involved in the cancellation of tax rebates, and the export volume from January to September was 523,600 tons, accounting for 85.51% of the total export volume. Assuming that the average grade of this part of the export copper is 80%, the copper content accounts for about 3.93% of China's total copper consumption. According to SMM data, total copper exports are expected to decline by 210,000 tons in 2025, affecting demand by 1.4%.
In terms of aluminum, there are a total of 24 aluminum codes involved in the cancellation of export tax rebates, almost covering the main domestic aluminum products such as aluminum profiles, aluminum plates and foils, and aluminum bars. According to customs data, the total export of the 24 related aluminum products from January to September 2024 is about 4.62 million tons, accounting for 99% of the total domestic aluminum exports, accounting for about 15% of domestic aluminum consumption; In 2023, China's exports of related aluminum products are about 5.166 million tons, the amount is about 17.74 billion US dollars, accounting for 98% of the total exports.
Overall, the proportion of aluminum-related exports in domestic consumption (about 15%) is significantly higher than that of copper-related exports in domestic consumption (about 4%), so the impact of the cancellation of tax rebates on aluminum prices is greater than that of copper, and at the same time, the short-term interest in external aluminum prices is negative for domestic aluminum prices, which can also be seen from the plate. After the news came out on the afternoon of November 15, the LME aluminum price rose 5.56% in the evening, and the LME copper price fell 0.21%; Shanghai aluminum fell 1.63% and Shanghai copper fell 0.26%. Therefore, the following analysis focuses on the impact of policy on aluminum.
Second, the historical adjustment of export tax rebate policy
Looking back at history, in June 2007, the Ministry of Finance and the State Administration of Taxation issued the "Notice on Reducing the Export tax rebate Rate of some commodities" Finance [2007]90 notice, from July 1, 2007 to cancel the export tax rebate of non-alloy aluminum bars and other non-ferrous metal processing products, involving a total of eight subjects of products, mainly involving aluminum profiles and aluminum wire. The adjustment of the export tax rebate has a more obvious impact on the export volume, especially the aluminum alloy hollow profile, the export volume in July 2007 was 5589 tons, down 21.7% year-on-year, down 47.3% month-on-month, and it maintained a negative growth rate in the following year, until September 2008, the profile export volume returned to the level before the cancellation of the tax rebate.
Third, the impact of export tax rebate policy on aluminum prices
According to SMM estimates, after the epidemic, domestic aluminum processing enterprises mostly use domestic aluminum prices as the base price and foreign contracts, according to the processing fee of 4,000 yuan/ton, the actual export price is 20850 (SMM spot aluminum price on November 15) +4000=24850 yuan/ton. The superimposed 13% tax rebate is 24850/ (1+13%) *13%=2859 yuan/ton, and the actual income of the enterprise is 2859+24850=27709 yuan/ton. After December 1, domestic enterprises no longer enjoy the tax refund of 2859 yuan/ton, export orders face the risk of loss, and even destroy the situation. Therefore, domestic enterprises need to renegotiate with foreign companies to negotiate the redistribution of the previous 2,859 yuan/ton profit. Before the outcome of the negotiations, the scale of domestic aluminum exports is bound to be suppressed, which will negatively affect domestic aluminum prices in the short term. The latest data show that the domestic aluminum foil/aluminum strip/aluminum profile export profit per ton are 385, 406, 233 yuan, if the export tax rebate is canceled, the probability of aluminum exports will be a loss; When the Shanghai-London ratio is repaired, export profits may recover.
In the short term, the cancellation of the aluminum export tax rebate will increase the export cost of aluminum export enterprises to a certain extent, and inhibit the export enthusiasm of Chinese aluminum processing enterprises. In the medium and long term, China, as an important exporter of aluminum in the world, there is a certain gap in the supply and demand of overseas aluminum. In the case of no corresponding increase in overseas supply, the periodic reduction of China's aluminum exports and the increase in export costs can push up overseas aluminum prices, and the price gap between domestic and foreign aluminum prices will expand, regardless of the exchange rate, domestic aluminum export profits will rebound. Or gradually repair China's aluminum exports. In addition, the growth rate of overseas aluminum production is limited, China's aluminum still has better overseas opportunities, and the tax cost will also be transferred to the overseas buyer's market.
In summary, the current macro aspect is in a policy vacuum period, the off-season demand in the fourth quarter is facing weakening pressure, the price is showing a continuous downward trend, and the steel price or the overall pressure is weakening in the second half of November. However, based on the current contradiction between supply and demand of finished materials has not been highlighted, and the market is still looking forward to the Central Economic Work Conference in December, it is expected that the space for this round of decline is limited, and the possibility of rebar and hot coil prices breaking through the low level before September is unlikely, and the bottom rebound market will appear again near December.
