Impact of China's Export Rebate Policy Adjustment on the Aluminum Industry

On November 15, 2024, China's Ministry of Finance and the State Taxation Administration jointly issued the "Announcement on Adjusting the Export Rebate Policy," announcing the cancellation of export rebates for aluminum products from December 1, 2024. This policy adjustment undoubtedly has a profound impact on the aluminum industry, involving 24 tax numbers of products such as aluminum plates, strips, foils, tubes, tube accessories, and some aluminum bar and section materials. This article will provide a detailed analysis of the impact of this policy adjustment on the aluminum industry from both short-term and long-term perspectives.

I. Short-Term Impact

  1. Increased Export Costs and Compressed Profit Margins

The most direct impact of canceling the export rebate policy is an increase in the export costs of aluminum products. In the past, the export rebate policy provided aluminum enterprises with a certain profit margin, making Chinese aluminum products competitive in the international market. However, with the cancellation of the rebate policy, this profit will be replaced by taxes, severely compressing the profit margins of enterprises. Especially for enterprises that rely on export rebates to maintain profit levels, this policy adjustment is undoubtedly a heavy blow.

  2. Decreased Export Orders and Intensified Market Competition

Due to the rise in export costs, the competitiveness of Chinese aluminum products in the international market will decline. This may lead overseas buyers to turn to suppliers from other countries, thereby reducing demand for Chinese aluminum products. The decrease in export orders will directly affect the production and operation of aluminum enterprises and intensify market competition. To compete for orders, enterprises may need to adopt pricing strategies that further compress profit margins or even lead to losses.

  3. Divergence in Aluminum Prices and Enhanced Domestic and International Market Linkages

After the cancellation of the export rebate policy, there has been a noticeable divergence in aluminum prices between domestic and international markets. The aluminum price on the London Metal Exchange (LME) rose rapidly, while domestic aluminum prices showed a downward trend. This divergence further highlights the impact of the policy adjustment on the aluminum market. The enhanced linkage between domestic and international aluminum prices exposes aluminum enterprises to greater market risks.

  4. "Rush to Export" Phenomenon and Subsequent Decline in Export Volumes

During the window period before the official implementation of the policy, i.e., before December 1, there was a wave of "rush to export" in the domestic aluminum product market. Enterprises may increase export efforts to complete exports before the policy change. However, after the rush, the export volumes of related aluminum products are expected to decline. This short-term fluctuation in exports will have an important impact on the production, operation, and market layout of aluminum enterprises.

II. Long-Term Impact

  1. Driving Industry Restructuring and Transformation Upgrades

Although the cancellation of the export rebate policy has caused considerable impact on the aluminum industry in the short term, in the long run, this policy will drive the industry to undergo structural adjustments and transformation upgrades. Enterprises need to respond to the challenges brought by policy changes by improving product quality, reducing costs, and expanding markets. This will help eliminate backward production capacity and enhance the overall competitiveness of the industry.

  2. Promoting Green Development and Technological Innovation

With increasingly stringent environmental regulations and intensifying market competition, aluminum enterprises need to pay more attention to green development and technological innovation. The cancellation of the export rebate policy will prompt enterprises to increase investment in research and development, driving innovations in mining processes, smelting technologies, and processing techniques. By adopting more environmentally friendly and efficient production methods and technologies, enterprises can reduce production costs, improve product quality and added value, and thereby gain a greater competitive advantage in the international market.

  3. Optimizing Foreign Trade Structure and Enhancing International Competitiveness

The cancellation of the export rebate policy is one of the important measures taken by the Chinese government to optimize the foreign trade structure. By reducing exports of low-value-added products, it helps narrow the trade surplus, reduce frictions caused by trade imbalances, and optimize the foreign trade structure. At the same time, this policy will prompt aluminum enterprises to focus more on enhancing international competitiveness by strengthening technological innovation and brand building to increase their influence in the international market.

  4. Strengthening International Cooperation and Diversifying Markets

Facing the challenges and opportunities brought by the cancellation of the export rebate policy, aluminum enterprises need to strengthen international cooperation and diversify markets. By establishing long-term and stable cooperative relationships with overseas enterprises and participating in international market competition and cooperation, enterprises can reduce market risks and increase market share. At the same time, enterprises can consider expanding emerging markets and developing country markets to seek new growth points.

III. Conclusion

In summary, China's export rebate policy adjustment has had a profound impact on the aluminum industry. In the short term, the policy adjustment will increase export costs, reduce export orders, and intensify market competition. However, in the long run, this policy will drive the industry to undergo structural adjustments and transformation upgrades, promote green development and technological innovation, optimize the foreign trade structure, enhance international competitiveness, strengthen international cooperation, and diversify markets. Facing the challenges and opportunities brought by this policy adjustment, aluminum enterprises need to actively respond and seek new paths for transformation upgrades to achieve sustainable development.