Electra Battery Materials Corp V.ELBM

China Tax Hike on Copper Exports

[MRBIG]

https://www.stockhouse.ca/bullboards/wraplink.asp?url=www.forbes.com/business/feeds/afx/2006/03/09/afx2581870.html China tax hike on copper exports aims to increase supply at home - analysts 03.09.2006, 04:27 AM BEIJING (AFX) - China's decision to double export taxes on copper is mainly based on scarcity and pricing concerns and not on environmental or energy use issues as claimed by officials, analysts said. Authorities today announced they will raise export taxes on copper and copper alloy products to 10 pct from the current five pct from April 10 to discourage mining and processing of the metal which is highly polluting and energy consuming. Similar taxes on rolled-copper products will be raised to 10 pct from nil. Analysts said the hikes were designed to discourage exports of the scarce metal. 'China has a scarcity of copper,' said Wu Xianfeng, a metals analyst with Guotai Junan Securities. 'But there is an irresistible impetus to export the commodity due to price differentials between home and abroad, with domestic prices considerably lower than overseas,' he said. Wu said the government's explanation for the hike -- that it wished do discourage processing of the metal for environmental reasons -- was misleading. 'I don't think the major reasons for the export tax hike are because copper is high-polluting or energy-intensive. It has more to do with China hoping to more effectively control supplies of copper, especially electrolytic copper,' he said. Wu also said he couldn't rule out the possibility that this latest move is at least in part related to last year's disastrous short position on the London Metals Exchange taken by a Chinese commodities trader. 'The trader's massive miscalculation ended up putting a lot of pressure on Chinese supplies and prices, and the government is naturally keen to avoid a repeat of that,' he said. Wu said a quick look at China's trade flows reveals that prices at home were artificially suppressed. 'China shouldn't be exporting copper in the first place. We rely on imports for 40 pct of our copper and 60 pct of our copper ore,' Wu said. 'Yet despite this heavy reliance on imports, the fact that China still manages to export the product means domestic prices are far too low,' he said. Dr Xu Zhongbu, CEO of Beijing Metal Consulting Ltd, agreed, saying: 'it is not feasible for China to be exporting copper.' 'With the recent capacity increases in copper smelting across the country, the government is worried about shortages,' he said. He said that showing restraint on exports would also help lower skyrocketing import prices. 'In fact, (smelter expansion) is why copper ore import prices have risen faster than even iron ore despite the latter grabbing all the headlines ... so China's efforts to limit copper exports are reasonable,' Xu said. In the first nine months of last year, China exported an estimated 68,474 tons of refined copper, down 40.9 pct from the same period in the previous year. [e-mail]