SHANGHAI, Mar 5 (SMM) – Following the announcement of VAT cuts, the backwardation structure on the Shanghai Futures Exchange copper April-May spread widened to about 600 yuan/mt as of CST 10:11 on Tuesday March 5, compared to 70 yuan/mt at closing on Monday.
A tax cut will lower the costs for holding forward cargoes. This generated arbitrage opportunities and widened the backwardation structure.
China will cut the manufacturing VAT by 3 percentage points, Premier Li Keqiang said in work report at the annual National People's Congress on Tuesday.
The manufacturing VAT will drop from 16% to 13% while the VAT for transport and construction will be cut from 10% to 9%.