On August 15th, the Ministry of Finance of China announced to impose 15% export taxes on aluminum alloy (HS code: 76012000), effective August 20th, and also raised export taxes on various types of coal.  The Central Government’s adjustment of export taxes on those products and implementation date of the new policy were beyond previous market expectations.
 
The implementation of the new export tax will have great negative impact on domestic refined aluminum prices, when domestic inventories were continuously growing and downstream demand remained weak.  On the other hand, prices of refined aluminum in international markets will likely experience slight increases due to possible declines in monthly supplies of 40-50 kt from China, and the SHFE/LME price ratio will decrease evidently. 

In addition, the Central Government’s increases in export taxes on aluminum alloy will only exert limited impact on small-medium producers in the secondary aluminum industry.  According to Chinese Customs statistics in 2007, a large number of secondary aluminum products (HS code: 76012000) were exported in processing trade, and exports in general grade accounted for 1/4.  Shanghai Xinge NonFerrous Metals and other domestic large secondary aluminum producers said the exports in processing trade accounted for a large proportion, and exports in general trade mainly happened in small-medium producers.  Hence, CBI believes the implementation of the new export policy will not only effectively restrict exports in non-regular enterprises, but be beneficial for the integration and healthy development of Chinese secondary aluminum industry.