China to Tax Aluminum Alloy Additive Metals -Industry

HONG KONG, June 30 -- China may impose export taxes on aluminum alloy additives such as silicon, magnesium and zinc purchased in the domestic market, in a move that could lead to new taxes on other alloys containing base and minor metals, industry sources said.

Exports of unwrought aluminum alloy such as grade ADC12, which trades on the London Metal Exchange, are subject to a 15 percent export tax. But the exports can be duty-free if these alloys are made from imported materials.

To avoid taxes, producers buy standard imported aluminum scrap containing 3-10 percent of silicon and then beef up levels of the additive with silicon bought in the Chinese market. Such aluminum alloy exports are not taxed.

But two industry sources said customs officials had verbally informed large aluminum alloy producers that additive metals bought from the domestic market would be taxed based on rates for primary metals. For silicon, the tax is 15 percent.

“They are studying the plan and have not finalized it,” said an executive at an aluminum alloy producer in the east, adding that the firm was not aware when the requirements would be effective.

The taxes are expected to raise exporters' prices for Chinese aluminum alloy, he said.

An alloy producer in Guangdong province in the south said the firm had not received any verbal or written notice about the new requirements.

He said the firm would increase imports of high silicon aluminum scrap if a tax was required.

China's exports of aluminum alloy used by car makers are typically made from imported aluminum scrap. The alloy usually contains 9-13 percent of silicon, making it the second- biggest metal content in the alloy after aluminum.

China exported more unwrought aluminum alloy than any other base metal-based unwrought alloys, shipping 263,280 tonnes in the first five months, up 39 percent on the year after a 112 percent rise to 560,835 tonnes in 2010. Japan was the top buyer.

“Paying taxes is basically certain. The matter now is whether firms would be required to pay taxes for exports they made in previous years,” said an industry source who has direct knowledge of the plan.

“For now, different custom officials are saying different things. Some say firms should pay taxes for exports back dated to 2008 and some say from 2009,” she said.

The source said Beijing, which is trying to restrict exports of primary metals, may issue guidelines for the tax requirements soon.