Home / Metal News / Copper / Import Tariff Cut for Zinc Takes Effect
Import Tariff Cut for Zinc Takes Effect
Jul 1,2011 17:34CST
smm insight

SHANGHAI, Jul. 1st (SMM)--China cut the import tax for 33 products including zinc ingot and gasoline, starting July 1st. The tax cut is in favor of import and export trade balance, and will reduce costs at enterprises. But effects on zinc industry are still indeterminate.

According to an announcement from Customs Tariff Commission of the State Council, the import tariff of 33 goods including gasoline will be adjusted starting July 1st, 2011, with zinc ingot import tariff cut to 1%, down from 3%.

The import tariff adjustment involves in zinc ingot, zinc alloy and zinc scraps, with the tariff of zinc ingot (#0, #1 and #2) and zinc alloy being cut to 1%, down from 3%.

According to SMM sources, domestic zinc sector believe the policy will not negatively affect domestic smelters in the near term. SMM believes that the import tariff for zinc ingot will be cut RMB 350/mt based on the current prices once the tax-cut policy is implemented. Domestic zinc industry will be negatively affected if zinc ingot imports grow significantly. Downstream buyers had been purchasing imported zinc ingot aggressively in 2009, which impacted domestic zinc ingot industry significantly.

Negative effect from the tax cut will be limited in the short term due to three factors. First, the SHFE/LME zinc price ratio is still the key factor influencing zinc ingot imports, which is unfavorable currently. Second, imported zinc is now not only raw material for downstream manufacturers, but also a financing media, so the import tariff cut will affect financing zinc imports limitedly. Third, downstream zinc enterprises (including galvanizing, die-casting zinc alloy, copper, zinc oxide and zinc and EMM battery enterprises) will be benefited due to reduced costs of raw materials. But zinc ingot purchasing mainly depend on end orders. Since orders from the manufacturing sector are low during the seasonal low demand period, downstream enterprises will be cautious due to tight cash flow and fluctuating zinc prices, so purchasing for raw materials will not increase significantly in the near term. 

SMM believes that growing zinc ingot imports may impact domestic smelters due to two factors. First, increasing zinc ingot raw material may negatively affect domestic zinc smelting. Second, growing zinc imports may weigh down domestic zinc prices. The import tax cut for raw materials will reduce purchasing costs of enterprises, but not during the seasonal low demand period since they purchased modestly. SMM believes that zinc ingot imports may vary from enterprises which operate and purchase differently. Imports of #0 zinc ingot will not change significantly due to seasonal low demand period for galvanizing industry. Demand for #1 and #2 zinc imports may grow since battery and zinc oxide sectors are operating normally. According to SMM sources, battery and zinc oxide enterprises increased purchasing for imported zinc ingot recently. Zinc ingot imports will likely increase during the traditional peak demand period, but also depend on end orders.

China is supposed to begin regulation in zinc industry by cutting the import tax for zinc ingot in 2011, which will not have so much effect on financing imports than on downstream purchasing. Prices battle between imported and domestic zinc will become fiercer. In recent years, China has been taking measures to increase industrial concentration ratio, but targets could barely be realized due to dispersed and wildly increasing new expansion capacity. China is now likely to take such a move to inspect and regulate zinc industry. The policy is overshadowing the market, and SMM will keep an eye on the after-effects or if China will make additional policies for the industry.


Copyright © SMM. All Rights Reserved

None of this material may be used for any commercial or public use in any forms or means, without the prior written consent of SMM. For reproduction issue, please contact us by email: service.en@smm.cn


For queries, please contact Frank LIU at liuxiaolei@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn