China cuts tax rebate on select export products, global metal stocks in focus

A worker at the Zhejiang Huanergy Co. production facility in Jinhua, China, on Friday, May 31, 2024. Huanergy, as the company is known, supplies copper foil to Chinese powerhouses like BYD Co. and Contemporary Amperex Technology Co. Photographer: Qilai Shen/Bloomberg

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China last week decided to reduce or cancel export tax rebates for select products made of aluminium and copper, along with refined oil products and batteries, sending prices Aluminium futures sharply higher in London. Back home, shares of metal producers like Hindalco, Nalco and Vedanta are closely tracking cues relating to this development.

China’s exports large amounts of aluminium as semi-finished product, which has been a point of trade tensions between the country and Western economies. These exports across a range of aluminium products such as pipes, plates, sheets and strips receive tax rebates of up to 13%.

Export rebates on non-metallic mineral products, modified animal fats and plant oil, batteries, photovoltaics too have been reduced from 13% to 9%, with effect from December 1. The development has also pushed up international soyoil prices too.

“This could be seen as a strategic move in the context of trade tensions following Trump’s win in the US presidential elections,” Bloomberg News quoted ING Bank analyst Ewa Manthey.

This decision could curb short term export of these products, according to a Shanghai Metal Market note on Friday. Any reduction in Chinese exports could tighten the global supply of these products and may increase prices, since China is the world's largest producer of aluminium as well as alumina.

In 2023, China exported 5.2 million tonne of semi-finished aluminium goods, or about 7% of the global aluminium supply.

Any tightening of the supply of aluminium and aluminium products globally could potentially benefit Indian producers like Nalco, Hindalco and Vedanta Limited.