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Concern Over the Potential Removal of Export Tax on Primary Aluminum from China

The Chinese Non-Ferrous Metals Industry Association (CNIA) recently called for the Chinese government to remove a long-standing 15% export tax on primary aluminum. The CNIA “appealed to all relevant national authorities to eliminate as soon as possible the provisional export tariff on aluminum to achieve integration of domestic and international aluminum markets.”

The Chinese government, which relies heavily on imported bauxite, has long applied export taxes on primary aluminum as part of a broader strategy to discourage exports of energy-intensive products and emphasize sustainable, quality growth. The unilateral removal of these taxes could have unforeseen impacts on the balance of trade and the global aluminum market.

Bloomberg reported, “The removal of fees to ship certain aluminum products may encourage further exports from the country that accounts for about half the world’s production. Global prices may sink as the move encourages producers to shift China’s aluminum glut overseas.”

The Aluminum Association expressed strong concern about the potential removal of the export tax. In the U.S., domestic primary aluminum production is an essential element to American manufacturing. According to an economic analysis by John Dunham & Associates, this segment of the industry is responsible for a minimum of 10,600 jobs and $6 billion in economic output. This segment could come under additional pressure should China remove the export taxes on primary aluminum.

“We strongly encourage the Chinese government to consider both the impact on the global aluminum market, as well as the impact on their country’s own sustainability goals before heeding any call to remove export taxes on primary aluminum,” said Aluminum Association president and ceo Heidi Brock. “During a time when China is making global commitments to reduce greenhouse gas emissions, it would be a serious mistake to change course on this long-standing policy.”

The carbon footprint for primary aluminum produced in North America has declined by nearly 40% since 1995, while aluminum produced in China is still among the most carbon intensive in the world. Aluminum smelters in China emit 5% of China’s total CO2e emissions. If these smelters were a stand-alone country, they would be the 16th highest contributor to global warming. Any policy which would encourage even more growth in these carbon intensive smelters must be reconsidered.

Already, the share of aluminum imported into the U.S. is growing at a rapid pace. According to Aluminum Association data, from 2012 through 2014, U.S. imports of semi-fabricated aluminum products (semis) from China increased 115%, growing China’s share from roughly 14% to nearly 28% over that period. Imports of Chinese semis totaled 675 million lbs year-to-date, an increase of 75% over the same period in 2014.

The increase in volume has driven up China’s market share to account for nearly 36% of all aluminum semis imported through June 2015, up from 26% last year. To put this in perspective, total U.S. imports of semis from all countries outside of China are up roughly 11% year-to-date.

The Aluminum Association has recently expressed concerns about misclassified metal coming out of China as well as the removal of a long-time duty on aluminum rod and bar. The Association supports a level playing field where all global aluminum producers can compete fairly. The North American aluminum industry will continue to voice these concerns to relevant authorities in the U.S. and globally.

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