China Ends ‘Massive and Complex Export Subsidies’ But Aluminum Rebate Remains

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Source: Adobe Stock/ alexlmx

Big news for companies buying aluminum product or semi-finished goods from China and for aluminum product producers who have been facing tough competition from Chinese exporters.

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MetalBulletin reports China has agreed to end export subsidies it provided to industries including aluminum products, titanium and specialty steel after the U.S. complained to the World Trade Organization (WTO) in February 2015. Except, according to Andy Home of Reuters, it’s not big news.

New WTO Agreement

Before we get excited that Chinese manufacturers may be forced to join the real world, Home urges some caution. United States Trade Representative (USTR) Michael Froman’s headline grabbing statement was, “Today we have signed an agreement with China to eliminate export subsidies that the United States challenged because they are prohibited under WTO rules.”

Are aluminum slabs welded together really "deep-processed extrusions?"

Are aluminum slabs welded together really “deep-processed extrusions?”

That actually covers a host of product areas including textiles, footwear, medical products and chemicals to name but a few. Aluminum comes a lowly third on the list and the sums involved are paltry when you consider the breadth of products effected and the time frame — the last three years. Apparently, most of the support mechanisms had already been dismantled so it will amount to so much hot air as far as the aluminum market is concerned.

Rebates, Not Subsidies

Of much more concern to the aluminum market outside China is the continued 15% value-added-tax refund producers enjoy on exports of aluminum semi-finished products, a subsidy that would be bad enough in itself but which is being gamed by producers selling primary metal as product and, in so doing, swamping the Asian market with primary metal that is suppressing the price. China has given absolutely no indication that it is looking at amending that subsidy and nor says Home should we expect any change soon.

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So before buyers go checking their contracts and producers start gearing up for an uptick in orders, do a double take and see this latest bit of news for what it is, useful no doubt in some product areas, it will have minimal to no impact on aluminum.

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