Metals News
Price spreads between SHFE aluminium contracts narrow on China’s tax cut
smm insight

SHANGHAI, Mar 30 (SMM) – China’s decision to lower value-added tax (VAT) has led investors to move around their positions in SHFE aluminium over the past couple of days.

Effective from May 1, China’s VAT for the manufacturing industry would be lowered to 16%, from the current 17%, and to 10% for the transportation, construction, telecommunication and agricultural sectors, from 11%. The tax cut is expected to save some 240 billion yuan ($38 billion) for the industries.

Following the announcement on Wednesday March 28, price spread between SHFE aluminium 1805 and 1804 contracts rapidly narrowed to zero from 80 yuan/mt during the night trading session. This is because cargo holders such as smelters carried over their hedging positions further down the curve to delay cargo delivery in a bid to take advantage of the tax cut.

Forward contracts also saw a jump in open interest on Friday March 30, with 1805 and SHFE aluminium index up 17,408 lots and 29,788 lots, respectively.

However, the longer-term impact on the price spread remains to be seen.

Meanwhile, we expect companies in the aluminium industry to have a lighter burden of taxes and costs. This will support the environmental upgrades at plants as well as corporate transformation at plants impacted by export restrictions.


For editorial queries, please contact Daisy Tseng at 
For more information on how to access our research reports, please email

tax cut
For queries, please contact Frank LIU at
For more information on how to access our research reports, please email
Related Price

No Data