China will probably tweak its taxation policies again next year by adjusting export tariffs or tax rebates to curb energy-intensive production of aluminum and its products, said an industry official.
It will also take measures to prevent the country from becoming an alumina exporter, as China is short of bauxite.
But such an adjustment won't be made in a short time, as the government needs to observe the effects of the taxation changes announced in September and November, Wen Xianjun, head of aluminum branch of the China Nonferrous Metals Industry Association, told Dow Jones Newswires in a recent interview.
"We just raised the export tax on aluminum in November, so any further change won't come soon," Wen said.
He indicated that the import and export tax changes are provisional, meaning they are subject to change every year, as the government regulates the aluminum and alumina industries.
By curbing exports of the metals, the government hopes to cool investment in the resource-intensive industry, as aluminum production consumes a lot of electricity, and at the same time trim the country's huge trade surplus.
China's aluminum production reached 7.46 million metric tons in January-October, up 19% on year.
Wen said total output is likely to be around 10.5 million to 10.8 million tons in 2007 but added that more tax policy changes may affect production.
In November, China raised the tax on exports of primary aluminum to 15% from 5% previously, which has resulted in more exports of fabricated products.
Wen said the government has already taken note of the development and implied that more tax changes are on the way if the current policies don't work.
"High value-added products such as foils, extrusions and beverage cans are less likely to be affected than the low value-added ones such as plates," said Wen.
In September, China cut export tax rebates for some aluminum products to 8% and others to 11% from 13%.
Wen added that aluminum prices see more downside risks along with falling prices of alumina and end users' requests for lower prices.
China Needs Healthy Proportion Of Alumina Imports
Meanwhile, the rising alumina production capacity of China's privately-owned firms has reduced the country's imports in the past few years and resulted in falling prices on the global market amid concern the country might soon begin to export.
"We resolutely object to exporting (alumina)," said Wen.
"Instead, I think we need an appropriate proportion of imports, at least 5%-10% (of total consumption). We aren't for the idea of meeting all domestic demand by our own production."
China's alumina imports have been falling over the past three years and account for around 35% of total consumption this year, according to Wen.
Imports of alumina in January-October fell 0.8% on year to 5.71 million tons, China's customs data showed.
Meanwhile, alumina production rose 54% on year in January-October to 10.75 million tons, and Wen said it will probably reach 18 million tons for 2007.
The taxation changes in November also included a reduction in the import tax on alumina to 3% from 5.5% as a mild measure to encourage more imports of the raw material used in aluminum production.
When asked if this will be subject to change again next year, Wen didn't rule out the possibility, saying the government will consider the provisional import and export taxes every year.
"We don't support expansion of alumina production because we're short of bauxite," Wen said.
To meet the growing demand for the ore, China's bauxite imports in the first 10 months of this year saw a more than fourfold increase to 8.02 million tons.
They are likely to grow by another 40%-50% next year, Wen said, adding it depends on the capacity growth in Shandong province, whe
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