The Impact of Cancelling The Export Tax Rebate on Copper

Short-term Market Supply Changes: The cancellation of the export tax rebate policy may lead enterprises to accelerate exports before the policy takes effect, resulting in a phenomenon of concentrated export rush in the short term. This will have a certain impact on the supply of copper materials in the market, potentially leading to a temporary increase in domestic market supply, while the supply in the international market may become tighter.

Changes in Export Volume and Profit: The cancellation of the tax rebate will increase the costs for enterprises exporting copper materials through general trade, reducing their profit margins and affecting their subsequent export arrangements. However, enterprises with processing trade qualifications can produce and export copper materials through processing with imported materials, which is not affected by the cancellation of the tax rebate.

Tightening of International Market Supply: As China is a major supplier of copper materials globally, the cancellation of the tax rebate may lead to a reduction in the supply of copper materials in the international market, thereby pushing up copper prices on the London Metal Exchange (LME). In the short term, this may benefit LME copper prices, making them more robust.

Impact on Domestic Copper Prices: Although China is a net importer of copper, the impact of the cancellation of the tax rebate on domestic copper prices is limited. However, in the short term, it may exert some downward pressure on domestic copper prices.

Long-term Market Adjustments: In the medium to long term, the cancellation of the export tax rebate will encourage industrial metal enterprises to accelerate technological upgrades, improve product quality, and promote the elimination of outdated production capacity in the industry, thereby driving high-quality development in the sector. Additionally, enterprises may adjust their export strategies, such as increasing the proportion of processing with imported materials, to offset some of the impacts.

Changes in Domestic and International Price Differentials: The cancellation of the tax rebate may lead to an expansion of the price differential between domestic and international copper prices, especially in the short term. Enterprises may respond to rising cost pressures by increasing product added value or shifting towards higher-end copper deep-processing products.

In summary, the cancellation of the export tax rebate policy for copper materials will have a certain impact on market supply in the short term, including accelerated exports, increased domestic market supply, and rising international copper prices. However, in the long term, this policy will promote enterprise transformation and upgrading, enhance the added value of the industrial chain, and help maintain China's initiative in the global competition for copper resources.