Aluminum prices jumped after China said it would end a tax break on more than 5 million tonnes of aluminum exports.
Futures in London jumped 8.5% after the Finance Ministry said, without giving a reason for the change. China’s aluminum industry has historically exported significant volumes of the metal as semi-finished products that are used in value-added manufacturing or simply melted down for use as primary metal.
The move could curb flows out of China in the short term. But with limited room for production growth elsewhere, Chinese producers may be able to pass on the tax costs to overseas buyers, analysts at Shanghai Metal Market said in a note. The move could also boost exports of high-value aluminum products. “In principle, the market could solve the shortage by ramping up export arbitrage from China so that LME prices rise significantly, which would incentivize Chinese exporters to supply,” said Duncan Hobbs, head of research at trader Concord Resources.
Chinese state-run research organization Antaike said the measure covered 17.7 billion yuan ($2.4 billion) worth of exports last year, or 5.2 million tonnes. The move also boosted shares of aluminum producers outside China. Norsk Hydro ASA rose 7.3% in Oslo, while Rio Tinto Plc jumped 1.9% in London.
An export tax credit was also scrapped for copper and reduced for some refined oil, solar power, batteries and non-metallic mineral products. China has faced growing criticism for some of its trade practices, and its move could be part of a strategy to counter the new Trump administration, said Eva Manthey, a commodities strategist at ING Bank NV. “This could be seen as a strategic move in the context of trade tensions following Trump’s victory in the US presidential election,” she said. “China could use this as leverage in trade talks, demonstrating its ability to influence global market dynamics.”
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