China May Impose Aluminum Tax After Imports Surge

Nov. 27 (Bloomberg) -- China, the world’s largest aluminum consumer, may impose a tax on the metal after imports surged and pressured domestic producers, the National Development and Reform Commission said. The rising imports led to “lots of pressure” on the domestic market, Yu Dongming, a director at the industry coordination department of the country’s top economic planner said at a conference in Kunming today. The nation doesn’t have an import tax on the metal currently. Chinese purchases of aluminum were 13 times higher this year than in 2008 as traders and manufacturers bought the metal in anticipation of demand from the government’s $586 billion stimulus spending. A Chinese tax may stall a 31 percent gain in London aluminum futures this year as inventories globally grow. “We haven’t made a decision but we’re closely watching it,” Yu said. “This has aroused attention from the cabinet.” Chinese imports of aluminum, used in packaging and making car and plane parts, jumped to 1.4 million tons in the first ten months. Futures traded in Shanghai dropped 0.8 percent to 15,550 yuan ($2,277) a ton today. Prices in London rose 0.2 percent to $2,012 a ton. Falling Prices The government may not need to act now as imports have fallen to just 25,950 tons last month from the record 360,000 tons in April, Wan Ling, a Beijing-based analyst at researcher CRU said. “A narrowing price discrepancy leaves less room for arbitrage activities, curbing imports,” she said. Barclays Capital forecasts that the global surplus in aluminum will increase 29 percent to 1.63 million tons next year as the biggest annual price increase since 1994 spurs output. The Chinese government is planning new measures to close metal plants and encourage mergers after encountering resistance from local governments who want to maintain employment, Yu said, reiterating a comment made by the Ministry of Environmental Protection on Nov. 13. “The progress of industry mergers has been slow because of a lack of specific measures to settle the unemployed workers,” he said. “We have realized this issue and are trying to address that.” The Environmental Protection Ministry had said the government may offer compensation to companies and workers for closures of plants. The government wants to eliminate 800,000 tons of outdated aluminum capacity this year, a target it “basically” expects to achieve, Yu said today. Chinese output of aluminum may be 12.6 million tons this year, slightly lower than in 2008, Yu said. Consumption may exceed 12 million tons, he said. --Xiao Yu, Helen Yuan. Editors: Tan Hwee Ann, Keith Gosman. To contact the Bloomberg News Staff on this story: Xiao Yu in Beijing at yxiao@bloomberg.net;