Big changes in the aluminum industry! Cancellation of aluminum export tax rebate

On November 15, 2024, the Ministry of Finance and the State Administration of Taxation of China jointly issued an announcement, deciding to cancel the export tax rebate policy for aluminum, copper, and chemically modified animal and vegetable oils, fats and other products from December 1, 2024.

This policy adjustment covers 24 aluminum-related tax numbers, involving aluminum sheets, aluminum foils, aluminum tube accessories and some aluminum profiles.

Once this announcement is released, what impact will it have on the world? Why did my country choose to take this action?

Policy causes shock

Aluminum is an important industrial raw material, known as the “electricity tiger”. It consumes about 13,000 to 15,000 kWh of electricity to produce each ton of aluminum.

In 2023, China’s total aluminum exports will reach 5.287 million tons, and its production electricity consumption will be about 70 to 80 billion kWh. This power consumption is equivalent to the total power generation of the world’s largest hydroelectric power station, the Three Gorges Hydropower Station, in one year.

China’s aluminum exports account for only 8.4% of its total production, and most of the aluminum is used for domestic consumption. However, Western countries have always accused China of dumping.

China’s cancellation of aluminum export tax rebates is undoubtedly a powerful counterattack against these unreasonable accusations.

The reason why this policy adjustment has attracted global attention is that for those countries that rely on China’s aluminum imports, the cancellation of export tax rebates will force them to purchase aluminum at a higher cost.

If they want to produce aluminum on their own, they must first ensure that electricity is sufficient and cheap. However, the EU faces power shortages and high energy costs due to sanctions against Russia; the United States frequently experiences power outages due to aging power grids; and India and Vietnam are even less capable of large-scale aluminum production.

Therefore, in this case, they can only meet their demand for aluminum in other ways.

China’s photovoltaic installed capacity has ranked first in the world for eight consecutive years. At the same time, it has also ranked first in the world in all links of the photovoltaic industry chain – silicon wafers, battery cells and components, with a market share of more than 80% of the global total.

Although China has not yet ranked first in the world in the field of nuclear power, by the end of 2023, the number of nuclear power units under construction in China has reached 26, with a total installed capacity of 30.3 million kilowatts, ranking first in the world.

China also has independently developed third-generation pressurized water reactors “Hualong One” and “Guohe One”, and the Huaneng Shidao Bay high-temperature gas-cooled reactor demonstration project of fourth-generation nuclear power technology is underway. In addition, the world’s first commercial modular small reactor “Linglong One” on land is expected to be put into production in 2026.

This shows that if other countries want to promote the development of the aluminum industry, they may still need to purchase clean energy equipment from China.

China’s announcement to cancel the aluminum export tax rebate not only demonstrates its core position and strong strength in the global aluminum industry chain, but also shows the world the far-reaching influence of China in adjusting its industrial policies.

The importance of the aluminum industry

China is currently the country with the largest scale, strongest production capacity and leading export volume in the global aluminum industry.

According to customs data, from January to March this year, China’s export volume and export value of aluminum products showed significant growth. Affected by multiple factors such as the ongoing global epidemic, tight energy supply, and changes in the supply chain pattern, the international market’s dependence on Chinese aluminum materials and products has further increased.

Since 2005, the United States has been China’s largest export market for aluminum products, a position that has lasted for 17 years.

The importance of the aluminum industry is not only reflected in its profound impact on the global economy, but also in its wide range of applications.

The consumption of aluminum in the construction industry, transportation industry, packaging industry and other fields is extremely considerable, accounting for approximately 60% of the total annual consumption.

At the same time, with the continuous advancement of science and technology, the application of aluminum in electronics, electrical and household appliances and other fields continues to grow.

The plight of Western countries

Western countries such as the European Union and the United States are facing many shortages in the power sector, which has seriously hindered the development of their aluminum industry.

Due to the EU’s sanctions on Russia, power shortages and soaring energy prices have caused the European aluminum industry to fall into a difficult situation after “gas outage”. France’s Dunkirk Aluminum Company announced that it would cut its production capacity by 22%, and Norway’s Hydro also faced the dilemma of being forced to close its factories.

Europe’s aluminum production has fallen to its lowest point since the 1970s, and the sharp rise in energy costs is posing a serious threat to the survival of the industry.

In addition, several European countries plan to take strict measures to deal with the energy crisis, but since the inflation problem is difficult to effectively alleviate in the short term, the energy dilemma may become more serious in winter, and the reduction in electrolytic aluminum production in Europe and the United States may be further expanded.

The situation in the United States is also not optimistic. The recovery of the manufacturing industry faces many challenges, and the problem of power supply is difficult to be effectively solved.

The United States’ power grid technology is relatively backward, making the cost and price of electricity significantly higher than that of China. In the total production cost of aluminum smelters, electricity costs account for 40%.

Companies are calling on the federal government to invest more in clean aluminum production to address challenges such as soaring electricity prices and a lack of low-cost renewable energy.

In 2024, North America could face power shortages during summer heat waves or winter storms. With the gradual retirement of fossil fuel power plants and the lagging development of renewable energy, this gap is difficult to fill effectively.

In addition, the widespread use of Bitcoin mining equipment and the rising energy consumption of data centers have further aggravated the energy shortage dilemma.

In this situation, Western countries have encountered many obstacles in developing the aluminum industry. The production process of aluminum is extremely power-intensive, and they cannot obtain sufficient and low-cost electricity supply, which leads to high production costs of aluminum.

Despite their power supply, they still find it difficult to compete with China in the aluminum industry chain. China not only accounts for 58% of the global aluminum supply, but also has long formed a clear industrial advantage in the deep cultivation of the aluminum industry chain.

In the dilemma of power supply shortage, Western countries have encountered many challenges in the development of the aluminum industry…

list of products for cancellation of export tax rebates

list of products with reduced export tax rebate rates

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