HONG KONG- China’s copper smelters plan to increase refined copper exports following a recent tax adjustment that have reduced their costs to export and made such trades more attractive, two sources at smelters said on Monday.
The move could encourage smelters to ship thousands of tonnes of refined copper from China to London Metal Exchange warehouses and weigh on global prices, which have so far shed more than 13 percent from the year’s high hit in February to $7,415 a tonne on Monday.
“We plan to export at least 10,000 tonnes of copper a month. Total exports (from China) could be between 20,000 and 30,000 tonnes per month,” said a sales manager at a large smelter, referring to the second half of the year.
Should domestic demand remain weak and overseas prices stay higher, exports from China, the world’s top consumer, may surge to as high as 180,000 tonnes in the second half of the year compared with just 9,336 tonnes in the same period last year, he said.
Benchmark three-month LME copper prices were more than 1,000 yuan ($160) per tonne higher than the most active copper contract in Shanghai on Monday.
China’s refined copper exports jumped 31 percent in the first six months to 192,560 tonnes versus a year ago as smelters such as Jiangxi Copper and other big trading firms shipped out large amounts under a duty-free tolling scheme and re-exported bonded copper stocks to take advantage of higher LME prices.
The only way for a smelter to avoid China’s export tax on copper is to be registered as a “toll” smelter, with permission to import copper raw materials and then export the finished metal tax-free.
Seven large copper smelters authorised by the government for toll trading were previously required to pay 3 percent of import value of the raw materials when they shipped out the finished metal.
But the Chinese tax bureau has since July 1 scrapped the 3 percent tax for tolled copper exports. Smelters are instead required to pay a 17 percent value-added tax on the fees they receive for processing the metal, sources at smelters said.
The latest adjustments have cut export taxes by around 75 percent compared with the previous policy, a unit of Jiangxi Copper said in a report on company website.
The overall tax reduction means that Chinese smelters, looking to profit from higher LME prices, will now be able to start exporting at a narrower price range than before.
“Our exports should be higher, depending on the price gaps (between domestic and LME prices),” said a second manager at the international trade division of a another large Chinese smelter.
Traders said Chinese smelters had begun to raise their overseas purchases of spot copper concentrate, a key ingredient for making refined copper. The increase in imports, which have come amid tepid domestic demand, suggested plans by smelters to step up production for sales overseas.