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Breaking news! The cancellation of aluminum export tax rebates: a major transformation reshaping the market landscape.
Time: 2024-11-19
Recently, the Ministry of Finance and the State Administration of Taxation of China issued a notice regarding the adjustment of export tax rebate policies, announcing that from December 1, 2024, the export tax rebate for products such as aluminum will be canceled. This policy adjustment has had a profound impact on the aluminum industry and its related enterprises.
Short-term impact
- Increased export costsThe cancellation of the export tax rebate directly leads to an increase in costs for aluminum export enterprises. Previously, when benefiting from the tax rebate policy, enterprises had a certain profit margin. Now, with the cancellation of the rebate, some enterprises may face losses in exports based on current processing fees, which will suppress their enthusiasm for exporting.
- Increased domestic supplyDue to the increase in export costs, the export volume of enterprises may decrease, and aluminum originally intended for export will shift to the domestic market. In the short term, this will increase domestic supply, and if demand remains unchanged, it may lead to downward pressure on domestic aluminum prices.
- Widening price gap between domestic and international marketsAfter the policy announcement, a significant divergence in domestic and international aluminum prices has already occurred, with London aluminum prices rising and Shanghai aluminum prices falling, rapidly widening the price gap. This will affect the trade flow of the domestic and international aluminum markets and the operational decisions of enterprises.
- Impact on enterprise profitsFor enterprises that did not mitigate risks in advance in contracts, their short-term profit levels will be affected to some extent, requiring them to renegotiate prices and other matters with customers, increasing operational risks and costs.
Mid-term impact
- Export volume may decline but remains resilientAlthough the cancellation of the export tax rebate has increased the cost of aluminum exports, considering the global distribution of aluminum processing enterprises and the advantages of Chinese aluminum processing enterprises in technology and products, China's aluminum still has a certain level of export competitiveness. It is expected that in the mid-term, the export volume will not significantly decline to excessively low levels and will maintain a certain scale.
- Reduction in overseas aluminum ingot importsAs the price gap between domestic and international markets widens, the losses from aluminum ingot imports have also expanded. It is expected that next year, overseas aluminum ingot exports to China will be affected, thereby changing the supply-demand balance in the domestic aluminum market.
- Increased industry competitionThe decrease in export volume and the increase in domestic supply will intensify competition in the domestic downstream profile market, putting greater market pressure on enterprises, which will need to maintain market share by improving efficiency and reducing costs.
Long-term impact
- Promoting industrial upgradingThe cancellation of the export tax rebate does not involve high value-added aluminum products, which will guide Chinese aluminum processing enterprises to develop towards refinement and high value-added products, increasing investment in technological innovation and other fields, benefiting the overall optimization and upgrading of the industrial structure, enhancing the competitiveness of enterprises, and promoting the industry towards high-quality development.
- Improving supply-demand structureIn the long term, domestic electrolytic aluminum supply is limited by capacity ceilings, while global electrolytic aluminum supply growth is declining year by year, and aluminum demand will still maintain a reasonable growth rate. As the global supply-demand gap for electrolytic aluminum widens, after a new balance is established in the domestic and international aluminum markets, domestic aluminum exports are expected to restore considerable profits. At the same time, the cancellation of the tax rebate will also promote the gradual elimination of low value-added, high-cost capacity in China's aluminum and copper processing industry, gradually improving the supply-demand structure.
- Favorable for overseas enterprisesOverseas dependence on China's aluminum and copper is relatively high. After the cancellation of the export tax rebate, the trend of rising overseas metal prices and processing fees is expected to significantly benefit overseas resource and processing enterprises. In the long term, the convergence of domestic and international prices will also support China's aluminum exports, benefiting leading enterprises in the processing industry with high-end product capacity and excellent cost control capabilities.
In summary, the cancellation of the aluminum export tax rebate policy has had a profound impact on the aluminum industry and its related enterprises. Although there may be certain challenges and pressures in the short term, from a medium to long-term perspective, this policy will promote the aluminum industry to develop towards higher quality and higher value-added directions, facilitating the balanced development of domestic and international aluminum markets. Therefore, aluminum export enterprises should actively respond to the challenges and opportunities brought by policy adjustments, strengthen technological innovation and quality management, and enhance product value and competitiveness to adapt to market changes and industry development trends.
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