Breaking News! The Ministry of Finance and The State Administration of Taxation Cancelled Export Tax Rebates for Copper Semis - SMM Analysis of Subsequent Impacts [SMM Analysis]

On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued Announcement No. 15 of 2024, stating the following regarding the adjustment of export tax rebate policies for products such as aluminum semis:

1. The export tax rebates for aluminum semis, copper semis, and chemically modified animal, vegetable, or microbial oils and fats are canceled.

2. The export tax rebate rate for certain refined oil products, PV products, batteries, and some non-metallic mineral products is reduced from 13% to 9%.

3. This announcement will be implemented from December 1, 2024. The applicable export tax rebate rate for the products listed in this announcement will be determined by the export date indicated on the export goods declaration form.

According to customs data and SMM forecasts, in 2024, driven by the recovery of foreign demand and favorable export price ratios, many enterprises have increased their efforts to expand into overseas markets to escape cut-throat competition, resulting in a significant increase in copper semis exports. We expect the export volume of copper semis in 2024 to rise by 25.4% YoY to 840,000 mt. Specifically, we forecast that the combined export volume of copper rod and wire will be about 180,000 mt, up 68,000 mt YoY (61%); the export volume of copper plate/sheet and strip will be about 133,000 mt, up 30,000 mt YoY (29%); the export volume of copper foil will be about 150,000 mt, up 15,000 mt YoY (11%); and the export volume of copper pipe & tube will be about 380,000 mt, up 56,000 mt YoY (17%).

Additionally, customs data shows that in 2024, 93.7% of copper rod and wire exports were through Ordinary Trade, while Processing Trade with Imported/Supplied Materials accounted for 4.8%. In 2019, Ordinary Trade accounted for 18.4%, and Processing Trade with Imported/Supplied Materials accounted for 77.8%. According to our survey with major copper rod exporters, after December 2024, it is estimated that the vast majority of exports will be conducted through the manual system. A major copper rod export trader indicated that they expect the export volume in 2025 to give back the increase seen in 2024, which was about 40%. If we refer to the export ratio in 2019, it is estimated that the proportion of Processing Trade with Imported/Supplied Materials will return to over 75% next year, while Ordinary Trade will drop to around 18%. Considering the impact of price ratios, we expect the export volume of copper rod and wire in 2025 to decrease by about 80,000 mt compared to this year. The export volumes of copper pipe & tube, copper plate/sheet and strip, and copper foil are also expected to decline to varying degrees, with a combined impact of 130,000 mt. The total export volume of copper semis is expected to decrease by 210,000 mt.

In 2024, China's actual consumption of copper cathode is expected to be 14.76 million mt. If the export volume of copper semis decreases by 210,000 mt in 2025, it will affect demand by 1.4%, which is not favorable for the domestic market that is in a tight supply-demand balance. In the short term, copper semis exporters may rush to export, but subsequently, domestic copper semis enterprises will have to increase the added value of their products or actively switch back to Processing Trade with Imported/Supplied Materials to boost export volumes.