KUCHING: China has announced that it will end its export tariffs on aluminium products – a move that will exacerbate a global glut of the metal which would mute growth prospects for Press Metal Bhd (Press Metal).
According to AmResearch Sdn Bhd (AmResearch), China’s Ministry of Finance said it will remove the 15 per cent export tax on aluminium rods and strips in addition to cutting taxes on other rare earths and metals.
The elimination of tariffs is part of the republic’s general strategy to remove red tape that allowed corruption to flourish at state-owned enterprises, reported The Financial Times.
“We believe that the removal of export tariffs on aluminium products will exert further pressure on global aluminium prices, which are already depressed due to concerns of oversupply,” opined the research house.
Recall that earlier this month, Alcoa – the largest aluminium producer in the US – had revised its expectations of a global supply exceeding consumption by 326,000 metric tonnes for this year. Earlier in January, it had forecasted a global deficit of 38,000 metric tonnes.
The move by China will result in more aluminium being offloaded to the global market even as smelters in the country increase capacity.
Earlier this month, the Chinese had reduced power prices for coal-fired plants, which is seen as a boost for aluminium smelters. This is in contrast to rising energy costs in other parts of the world, which resulted in smelters being shuttered.
For the first the three months of the year, aluminium shipments from China rose 43 per cent to 1.2million tonnes. Last year, China’s aluiminium output had rose nine per cent.
The LME aluminium spot price remains depressed for the year, trading at an average of US$1,801.34 per metric tonne year to date.
“Coupled with falling global premiums, and a mixed global economic growth – we believe that outlook for the aluminium market remains muted for the year.”