Recently, the Ministry of Finance announced the "2008 Tariff Implementation Plan." According to the new plan, some import tariffs on non-ferrous metal products will be lowered this year; while the steel export tax rate will be significantly raised, and the billet export tax rate will be increased from the current 15% to 25%. The export tax rate for some steel products will increase from the current 5% to 15%.
According to the official website of the Ministry of Finance, China's import and export tariff adjustments this year mainly related to MFN tax rates, annual tentative tax rates, treaty tax rates, and preferential tax rates. After this adjustment, China’s total tariff level in 2008 was 9.8%, of which, the average tax rate for agricultural products was 15.2%, and the average tax rate for industrial products was 8.9%.
Non-ferrous metal import tariffs partially canceled
In 2008, China will eliminate import tariffs on refined copper and refined copper cathode profiles and eliminate import tariffs on alumina and electrolytic aluminum.
The elimination of import duties on refined copper and refined copper cathode profiles will affect the profits of domestic copper smelting and processing industries. Refined copper import tariffs have dropped from 2% to 0, which may not be good news for domestic copper smelters. According to the standard of LME copper spot price of 6629 U.S. dollars per ton on December 21st, the cost of imported refined copper per ton in 2007 was about 59,000 yuan, and in 2008, this price was only 57,800 yuan. Equivalent to the domestic copper smelter copper sales price fell by about 1,200 yuan per ton.
Some analysts believe that the listed companies in the three copper industries of Jiangxi Copper (600362), Yunnan Copper (000878) and Tongling Nonferrous Metals (000630) are more affected by the impact. According to the 2007 interim report, Jiangxi Copper's refined copper and copper rod lines accounted for 39.91% and 43.93% of its main business revenue, Yunnan Copper accounted for 64.96% and 9.05%, and Tongling Nonferrous Metals Co., Ltd. together accounted for 78.13%. This tariff adjustment will have a significant impact on the above three listed companies. However, industry analysts said that tariff adjustments have a negative impact on smelters in the short term, but more imports may increase external prices.
In addition, the reduction in alumina import tariffs from 3% to 0 will also affect domestic alumina producers. From January to November last year, the total domestic alumina production was 17.61 million tons, which was a year-on-year increase of nearly 50% compared to 11.85 million tons in the same period of 2006. Xu Lu, an analyst at Qilu Securities, expects that national alumina production in 2008 will continue to grow by more than 30% to reach 25 million tons. If the alumina import tariff is removed, the fall in domestic alumina prices will be expected.
Lin Haoxiang, an analyst with Guotai Junan, believes: “China has been importing alumina, and the suspension of taxation on imported alumina will certainly put pressure on domestic alumina product prices. However, at present, domestic alumina prices are already at a high level, and proper pressure is normal. In addition, the reporter also noticed that in this tax rate adjustment, tariffs on imported electrolytic aluminum products are no longer imposed. Lin Haoxiang pointed out: "The domestic aluminum prices are relatively cheap, and imported electrolytic aluminum products do not necessarily make money even if they do not impose tariffs."
At the same time, the Ministry of Finance has also raised export tariffs on low-grade zinc and non-alloy tin. Most analysts believe that raising export tariffs on low-grade zinc will be conducive to industry consolidation and will benefit large-scale manufacturers such as Zhuzhou Smelter Group (600961). Since China is a major producer of tin, the increase in export tariffs on non-alloy tin will help boost international tin prices. Tiny shares (000960) in listed companies are expected to benefit.
New tax rate for steel products is better than expected
In the new tax rate plan, steel products also have relatively large adjustments. The tax rates for primary products such as pig iron and plain billet increased from 15% to 25%; the tax rates for rebar, general line, general rod and other products increased from 10% to 15%; the tariffs for 15% of welded pipes were minimally imposed; the narrow band tax rate was from 5% Increase to 15%. Industry analysts believe that the market has long been expecting export tariff adjustments on steel products. The adjustment did not involve hot-rolled coils, plates and profiles, and most cold-rolled, seamless pipes, most welded pipes, and cast pipes. Actually better than market expectations.
Sun Yong, an analyst at Galaxy Securities, said: “The fourth round of adjustments to export tariffs on steel products has been fully expected by the market and therefore will not have a significant impact. In addition, adjustments to the new tariffs are mainly concentrated at the low end of billets and raw steel. In terms of products, there is little impact on the export of steel listed companies."
According to analysts of CITIC Securities, based on the 2007 steel export situation, assuming this year's steel export volume and species distribution are similar to those in 2007, the export tariff adjustment will increase export tariff by about RMB 7.8 billion this year. Compared to last year's total export value of more than US$44 billion worth of steel products and the total industry profits of more than 200 billion yuan, the adjustment of this export tax rebate has little impact on the industry.
Some analysts believe that the trend of international steel prices will affect the effect of this export tariff adjustment. Industrial Securities analysts pointed out that the adjustment is unfavorable to the steel industry, which mainly exports low-end steel products. The expansion of production capacity of these products is relatively fast and domestic competition is fierce. Tariff increases will suppress some exports and further increase the supply pressure in the domestic market. However, the extent of the impact depends on the trend of the international market steel prices due to the increase of tariffs in China. If the international steel price rises sharply, the impact on exports will be relatively limited. For a leading steel company, such as Baosteel (600019), which produces high-end steel and replaces imports, the impact itself is small.
Due to the government's policy of limiting high energy consumption and low value-added production capacity, analysts generally expect that the government’s export policies for primary products such as steel embryos will further tighten, and industrial policies will guide production to high-end sheet and silicon steel and seamless steel tubes. Transfer of other products will promote the optimization of the steel industry structure. This tax adjustment will affect the profitability of steel companies in the short and medium term, but it will be beneficial to the optimization and integration of the Chinese steel industry in the long term.
According to the official website of the Ministry of Finance, China's import and export tariff adjustments this year mainly related to MFN tax rates, annual tentative tax rates, treaty tax rates, and preferential tax rates. After this adjustment, China’s total tariff level in 2008 was 9.8%, of which, the average tax rate for agricultural products was 15.2%, and the average tax rate for industrial products was 8.9%.
Non-ferrous metal import tariffs partially canceled
In 2008, China will eliminate import tariffs on refined copper and refined copper cathode profiles and eliminate import tariffs on alumina and electrolytic aluminum.
The elimination of import duties on refined copper and refined copper cathode profiles will affect the profits of domestic copper smelting and processing industries. Refined copper import tariffs have dropped from 2% to 0, which may not be good news for domestic copper smelters. According to the standard of LME copper spot price of 6629 U.S. dollars per ton on December 21st, the cost of imported refined copper per ton in 2007 was about 59,000 yuan, and in 2008, this price was only 57,800 yuan. Equivalent to the domestic copper smelter copper sales price fell by about 1,200 yuan per ton.
Some analysts believe that the listed companies in the three copper industries of Jiangxi Copper (600362), Yunnan Copper (000878) and Tongling Nonferrous Metals (000630) are more affected by the impact. According to the 2007 interim report, Jiangxi Copper's refined copper and copper rod lines accounted for 39.91% and 43.93% of its main business revenue, Yunnan Copper accounted for 64.96% and 9.05%, and Tongling Nonferrous Metals Co., Ltd. together accounted for 78.13%. This tariff adjustment will have a significant impact on the above three listed companies. However, industry analysts said that tariff adjustments have a negative impact on smelters in the short term, but more imports may increase external prices.
In addition, the reduction in alumina import tariffs from 3% to 0 will also affect domestic alumina producers. From January to November last year, the total domestic alumina production was 17.61 million tons, which was a year-on-year increase of nearly 50% compared to 11.85 million tons in the same period of 2006. Xu Lu, an analyst at Qilu Securities, expects that national alumina production in 2008 will continue to grow by more than 30% to reach 25 million tons. If the alumina import tariff is removed, the fall in domestic alumina prices will be expected.
Lin Haoxiang, an analyst with Guotai Junan, believes: “China has been importing alumina, and the suspension of taxation on imported alumina will certainly put pressure on domestic alumina product prices. However, at present, domestic alumina prices are already at a high level, and proper pressure is normal. In addition, the reporter also noticed that in this tax rate adjustment, tariffs on imported electrolytic aluminum products are no longer imposed. Lin Haoxiang pointed out: "The domestic aluminum prices are relatively cheap, and imported electrolytic aluminum products do not necessarily make money even if they do not impose tariffs."
At the same time, the Ministry of Finance has also raised export tariffs on low-grade zinc and non-alloy tin. Most analysts believe that raising export tariffs on low-grade zinc will be conducive to industry consolidation and will benefit large-scale manufacturers such as Zhuzhou Smelter Group (600961). Since China is a major producer of tin, the increase in export tariffs on non-alloy tin will help boost international tin prices. Tiny shares (000960) in listed companies are expected to benefit.
New tax rate for steel products is better than expected
In the new tax rate plan, steel products also have relatively large adjustments. The tax rates for primary products such as pig iron and plain billet increased from 15% to 25%; the tax rates for rebar, general line, general rod and other products increased from 10% to 15%; the tariffs for 15% of welded pipes were minimally imposed; the narrow band tax rate was from 5% Increase to 15%. Industry analysts believe that the market has long been expecting export tariff adjustments on steel products. The adjustment did not involve hot-rolled coils, plates and profiles, and most cold-rolled, seamless pipes, most welded pipes, and cast pipes. Actually better than market expectations.
Sun Yong, an analyst at Galaxy Securities, said: “The fourth round of adjustments to export tariffs on steel products has been fully expected by the market and therefore will not have a significant impact. In addition, adjustments to the new tariffs are mainly concentrated at the low end of billets and raw steel. In terms of products, there is little impact on the export of steel listed companies."
According to analysts of CITIC Securities, based on the 2007 steel export situation, assuming this year's steel export volume and species distribution are similar to those in 2007, the export tariff adjustment will increase export tariff by about RMB 7.8 billion this year. Compared to last year's total export value of more than US$44 billion worth of steel products and the total industry profits of more than 200 billion yuan, the adjustment of this export tax rebate has little impact on the industry.
Some analysts believe that the trend of international steel prices will affect the effect of this export tariff adjustment. Industrial Securities analysts pointed out that the adjustment is unfavorable to the steel industry, which mainly exports low-end steel products. The expansion of production capacity of these products is relatively fast and domestic competition is fierce. Tariff increases will suppress some exports and further increase the supply pressure in the domestic market. However, the extent of the impact depends on the trend of the international market steel prices due to the increase of tariffs in China. If the international steel price rises sharply, the impact on exports will be relatively limited. For a leading steel company, such as Baosteel (600019), which produces high-end steel and replaces imports, the impact itself is small.
Due to the government's policy of limiting high energy consumption and low value-added production capacity, analysts generally expect that the government’s export policies for primary products such as steel embryos will further tighten, and industrial policies will guide production to high-end sheet and silicon steel and seamless steel tubes. Transfer of other products will promote the optimization of the steel industry structure. This tax adjustment will affect the profitability of steel companies in the short and medium term, but it will be beneficial to the optimization and integration of the Chinese steel industry in the long term.