The Game of China's Aluminum Alloy Product Export Tax Rebate Mechanism
专栏:Industry information
In the past year, aluminum companies have complained about the export model of Chinese semi-finished aluminum producers.A year ago, there were allegations that China exported large quantitie..........
In the past year, aluminum companies have complained about the export model of Chinese semi-finished aluminum producers.

A year ago, there were allegations that China exported large quantities of semi-finished aluminum to Mexico for remelting and then exporting blanks to the United States. In the second half of last year, it was perhaps threatened by accusations from Western countries that the transit land was transferred from Mexico to Vietnam and Malaysia. The sharp rise in semi-finished aluminum exports from China to Vietnam and Malaysia has caused close attention in the metals industry.

Customs data shows that semi-finished aluminum exported to Malaysia was 251.22 million tons in 2013. By 2014, this figure rose to 220,461 tons, accounting for a quarter of China's semi-finished aluminum exports. The semi-finished aluminum exported to Vietnam increased from 6,529 tons in 2013 to 40.23 million tons in 2014. All of the above export actions did not violate laws and regulations. China has full right to export semi-finished aluminum and any other form of aluminum products to any country, such as Vietnam, Malaysia or Mexico, as they wish.

What worries aluminum producers is exactly what made them the most angry last year. There are allegations that Chinese semi-finished aluminum producers export their products to third-party countries and then re-melt the products into blanks for re-export. This will evade anti-dumping duties. This time, the producers are even more annoyed by an all-encompassing allegation that China's semi-finished aluminum exporters have increased the export prices of their products in order to obtain more VAT rebate subsidies from the Chinese government. It is understood that China's aluminum products currently enjoy up to 15% of export tax rebate subsidies. The reason why there is a hypothesis that “a semi-finished aluminum producer in China uses the tax rebate system for speculative exports” is actually very easy to understand. Because the aluminum trading data of Vietnam and Malaysia shows that the local consumption of aluminum imported from China is not proportional to the export volume.

However, it is very difficult to prove that Chinese exporters deliberately use the export tax rebate system. It takes a long time to make complaints through international organizations such as the World Customs Organization. This makes the extremely dissatisfied Western Aluminum Products Company feel powerless and believes that the best way to deal with the current situation is to wait for Chinese exporters to stop their misconduct. In fact, to some extent, Chinese exporters have already begun to do so.

National policy

Economic factors are still the main factor affecting the behavior of Chinese aluminum product exporters, and the reasons behind their large export of semi-finished aluminum to Vietnam and Malaysia include the geographical advantages of these two countries and the overall rise in metal prices. And if the overall price falls like the past few months, their exports will fall.

At the same time, the central government's policy still hopes to create a value-added industry to reduce primary aluminum exports and promote the export of deep-processed aluminum products. China lacks bauxite, which is a key raw material in the aluminum supply chain. China is also seeking ways to curb the high pollution caused by smelting, while accelerating the construction of the energy industry and water conservancy infrastructure. It is very clear that China's customs policy is generally consistent with national policies. However, the use of policy loopholes to export semi-finished aluminum materials for remelting and re-export is not allowed by the Chinese government. Beijing is unlikely to ignore this problem.

The influx of aluminum into the West – especially in the United States and earlier in Europe – did not exacerbate market concerns about structural overcapacity. At present, even if the problem of overcapacity cannot be counted as an end, this phenomenon has been largely alleviated. Aluminum practitioners also expressed doubts about the possibility of structural influx of aluminum. Because the Chinese government will eventually stop its exporters from using export tax rebates for speculative exports, or adjust policies to align exporters' behavior with national development goals. They believe that the most likely scenario is that China will properly listen to feedback from the international community and then formulate policies based on its own national interests.

For Western aluminum producers, fortunately, China’s national interests coincide with their own interests more than they expected.

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