Cancellation of Export Tax Rebates for Copper Semis! How Copper Rod Factories Respond from the Export Mode Perspective [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. Cancellation of export tax rebates for aluminum semis, copper semis, and chemically modified animal, vegetable, or microbial oils and fats.

2. Reduction of the export tax rebate rate for certain refined oil products, PV, batteries, and some non-metallic mineral products 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.

What is the impact on the current copper rod market? What are the current countermeasures of copper rod export enterprises? The specific analysis is as follows:

Copper rod enterprises currently export copper wire rods mainly under HS codes 74081100 and 74081900, both of which are included in the list of products for which export tax rebates are canceled. According to the latest customs data, as of September 2024, the export volume of copper rods under HS code 74081100 reached 46,300 mt, and the export volume of other refined copper wires under HS code 74081900 reached 47,700 mt, with a total volume of approximately 94,000 mt. The export volume of copper wire rods from January to September 2024 has already exceeded the total export volume for the entire year of 2023.

According to the SMM survey, the main export modes for copper wire rod enterprises are Ordinary Trade and trade under the processing trade manual, which includes processing with supplied materials, processing with imported materials, and deep processing transfer. Exports under the processing trade manual do not involve product taxation and tax rebates. The cancellation of export tax rebates for products such as aluminum semis and copper semis mainly affects those exported under Ordinary Trade.

According to customs data, for HS code 74081100, 96.7% of the export volume in 2024 was under Ordinary Trade, an increase of 35 percentage points compared to 2023. Ordinary Trade currently accounts for the majority of the copper wire rod export market. Following the issuance of Announcement No. 15, it is expected that exports of copper wire rods under Ordinary Trade will be significantly impacted. For copper rod enterprises and trading companies, confidence in exports under Ordinary Trade has been noticeably shaken. The current strategy is to advance as many orders as possible before December 1 and transfer the remaining orders to the processing trade manual. However, if transferred to the processing trade manual, such as processing with supplied materials, the enterprise's profit will only be the processing fee, with limited overall profit and operational flexibility. If transferred to processing with imported materials, the absolute price of raw materials will significantly increase, and downstream acceptance may be low, making future growth uncertain. If transferred to deep processing transfer, there are many restrictions, making it difficult to achieve.

Additionally, it is worth noting that some downstream industries of copper rods, such as copper foil, are also facing the cancellation of tax rebates, putting their profitability at risk, which may affect the performance of some orders in the near term. Some copper foil enterprises are currently considering purchasing imported copper rods or cooperating with domestic copper rod enterprises holding the processing trade manual.

SMM will continue to track and report on whether there are any changes in the export volume of copper rods within the year, whether the growth can continue next year, and whether new cooperation models will be reached with downstream enterprises after intensive consultations with downstream enterprises.