News

On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued the “Announcement on Adjusting the Export Tax Rebate Policy”. From December 1, 2024, all export tax rebates for aluminum products will be cancelled, involving 24 tax numbers such as aluminum plates, aluminum foils, aluminum tubes, aluminum tube accessories and some aluminum bar profiles. The introduction of the new policy reflects the country’s determination to resolutely guide the high-quality development of domestic aluminum enterprises and its confidence in China’s transformation from a major aluminum industry country to a strong aluminum industry country. After analysis, industry experts and scholars believe that a new balance will be established in the domestic and foreign aluminum and aluminum markets, and the overall impact of the new policy on the domestic aluminum market is controllable.

Aluminum Export Tax Rebate
In 2023, my country exported a total of 5.2833 million tons of aluminum, including: 5.107 million tons of general trade exports, 83,400 tons of processing trade exports, and 92,900 tons of other trade exports. The total export volume of the 24 aluminum products involved in the cancellation of export tax rebates is 5.1656 million tons, accounting for 97.77% of the total aluminum exports, of which the general trade export volume is 5.0182 million tons, accounting for 97.15%; the processing trade export volume is 57,600 tons, accounting for 1.12%; and the export volume of other trade modes is 89,800 tons, accounting for 1.74%.
In 2023, the general trade export value of aluminum products involved in the cancellation of tax rebates is US$16.748 billion, of which the general trade export value is refunded at 13% (without considering the deduction), and the processing trade is refunded at 13% of the processing fee (based on an average of US$400/ton), and the refund amount is about US$2.18 billion; the export volume in the first three quarters of 2024 reached 4.6198 million tons, and the annual impact amount is expected to be around US$2.6 billion. The aluminum products for which the export tax rebate is cancelled this time are mainly exported through general trade, accounting for 97.14%.

Impact of cancellation of tax rebate
In the short term, the cancellation of export tax rebate will have a certain impact on the aluminum processing industry. First, the export cost will increase, directly reducing the profits of export enterprises; second, the price of export orders will rise, the loss rate of foreign trade orders will increase, and the export pressure will increase. It is expected that the export volume in November will increase, and the export volume in December will fall sharply, and the uncertainty of exports next year will increase; third, the conversion of foreign trade capacity to domestic sales may aggravate domestic involution; fourth, it will promote the rise of international aluminum prices and the decline of domestic aluminum prices until a relatively balanced range is reached.
In the long run, China’s aluminum processing industry still has an international comparative advantage, and the global aluminum supply and demand balance is difficult to reshape in a short period of time. China is still the main supplier of the international mid-to-high-end aluminum market. The impact of this export tax rebate policy adjustment is expected to be gradually resolved.

Macroeconomic impact
By reducing the export of low value-added products, it will help to narrow the trade surplus, reduce friction caused by trade imbalances, and optimize the foreign trade structure.
The policy is in line with the strategic goal of China’s economy to develop high-quality, guide resources to innovation-driven, emerging industries with great growth potential, and promote economic transformation.

Response suggestions
(I) Strengthen communication and exchanges. Actively negotiate and communicate with overseas customers, stabilize customers, and explore how to bear the increased costs brought about by the cancellation of tax rebates. (II) Actively adjust business strategies. Aluminum processing companies insist on shifting to aluminum product exports, and do everything possible to stabilize the export market of aluminum products. (III) Work hard on internal strength. Overcome difficulties, keep integrity and innovation, accelerate the cultivation of new quality productivity, and ensure comprehensive advantages such as quality, price, service, and brand. (IV) Strengthen confidence. China’s aluminum processing industry ranks first in the world in terms of production capacity and output. It has great comparative advantages in industrial supporting facilities, technical equipment, and mature industrial workers. The current situation of strong comprehensive competitiveness of China’s aluminum processing industry will not change easily, and foreign markets still rely heavily on our aluminum exports.

Enterprise Voice
In order to better understand the impact of this policy adjustment on the aluminum processing industry, the organizers of the China International Aluminum Industry Exhibition interviewed a number of companies to jointly explore opportunities and meet challenges.
Q: What are the actual impacts of the export tax rebate policy adjustment on your company’s foreign trade business?

Company A: In the short term, due to the cancellation of export tax rebates, costs have risen in disguise, sales profits have fallen, and there will be certain losses in the short term.
Company B: Profit margins have been reduced. The larger the export volume, the more difficult it is to negotiate with customers. It is estimated that customers will jointly digest between 5-7%.

Q: How do you think the cancellation of the export tax rebate policy will affect the demand and price trend of the international market? How does the company plan to adjust its export strategy to cope with these changes? Company A:
For can lid materials, I personally think that the demand will not change much. During the most serious period of the epidemic, some foreign companies tried to replace aluminum cans with glass bottles and plastic packaging, but no such trend is expected in the near future, so the international market demand should not fluctuate too much.For prices, from the perspective of raw aluminum, after the cancellation of export tax rebates, it is believed that the LME and domestic raw aluminum prices will be almost the same in the future; from the perspective of aluminum processing, price increases will be negotiated with customers, but in December, most foreign companies have already signed procurement contracts for the next year, so there will be some problems with temporary price changes now.
Company B: The price change trend will not be very large, and Europe and the United States have weak purchasing power. However, Southeast Asia, such as Vietnam, will have certain competitive advantages in the international market due to low labor and land costs. More detailed export strategies still need to wait until after December 1.

Q: Is there a mechanism to negotiate with customers to adjust prices? How do domestic and foreign customers allocate costs and prices? What is the expected acceptance of customers?

Company A: Yes, we will negotiate with several major customers and get a result in the short term. Price increases are inevitable, but there may not be a way to increase by 13%. We may take a price above the median to ensure that we will not lose money. Foreign customers have always had a certain sales policy bias. Most customers should be able to understand and accept a certain degree of price increase after learning that China’s copper and aluminum export tax rebate has been cancelled. Of course, there will also be more intense international competition. Once China’s export tax rebate is cancelled and there is no longer an advantage in price, there is a chance that it will be replaced by some aluminum processing plants in other regions such as the Middle East.

Company B: Some customers also contacted us by phone or email as soon as possible, but because the agreements signed by each customer are different, we are currently communicating the acceptance of price changes one by one.

Company C: For companies with small export volumes, it means that the company’s own profit margin is low. However, for companies with large export volumes, 13% multiplied by the volume, the overall increase is high, and they may lose part of the overseas market.

Q: In the case of policy adjustments, does the company have plans to transform towards deep processing, production of parts or reprocessed products?

Company A: The export tax rebate for aluminum was canceled this time. We have been transforming towards deep processing, but we will wait until the State Administration of Taxation system finds out after December 1 before making development plans.
Company B: From a personal perspective, it will definitely happen, and the specific direction needs to be discussed.
Q: As a member of the industry, how does your company view the future development direction of China’s aluminum industry? Are you confident that you can overcome the challenges brought by the policy and continue to maintain international competitiveness?

Company A: We are confident that we can overcome it. Foreign demand for Chinese aluminum is rigid and cannot be changed in the short term. There is only a process of repricing in the near future.
In conclusion

The adjustment of the export tax rebate policy is one of the important measures taken by the government to support the high-quality development of the real economy. The good situation of maintaining high-quality and sustainable development of the domestic upstream and downstream industrial chains has not changed, and the negative impact of the cancellation of the export tax rebate for aluminum on the aluminum market is generally controllable.