The authorities said the move was aimed at maintaining stable growth of the country’s foreign trade – one of the main engines of economic growth.

Under the policy, Chinese companies would be exempted from customs duty and get VAT fully refunded on importing certain semi-fabricated aluminium products as well as copper, nickel and cobalt concentrate and exporting the finished products such as copper cathode, unwrought nickel as well as some semi-finished cobalt and aluminium products.

The latest policy change is expected to boost China’s exports of semi-fabricated aluminium products, copper and nickel and may encourage imports of primary aluminium.

More importantly, it allows Chinese companies to ward off risks caused by price fluctuations and offer them another chance to seek higher profit.

The policy undoubtedly would lead to increase of exports of such semi-fabricates as aluminium bar, rod and profiles but at the same time bring about downward pressures on the domestic primary aluminium market.

A series of measures by the government, including scrapping export VAT rebate and levying a 15% export tax on bars and rods has led to a marked drop of exports of such products.

In the first 11 months of 2008, exports of aluminium bar/rod and profiles, which used to account for more than 50% of all processed exports, fell 70.3% year-on-year to 243kt, compared to 845kt for all of 2007.

Source: China Metals e-mail