While LME inventories followed a downward trend, supporting rising aluminum prices, inventory levels in China remained more stable. Beijing’s latest policy the removal of the reduction in export tax on aluminum products that could mean even more domestic deals. This would be negative for the price of aluminum on the Shanghai Futures Exchange (SHFE). The removal of the tax cut, introduced to support Chinese sales abroad, could ease industrial capacity that caused trade tensions with the United States and Europe after the closure of aluminum smelters in China. globally due to oversupply, low prices and high energy costs. It could also be seen as a strategic move amid trade tensions following Trump’s victory in the US elections, which China could use as leverage in trade negotiations.

The tax rebate was also eliminated or reduced for copper, certain refined petroleum products, solar energy, batteries and non-metallic mineral products. Aluminum is the sector most sensitive to this change, given the importance of Chinese exports of this metal on the world market. Last year, China’s exports of semi-finished aluminum products accounted for about 7% of global aluminum products.

In the short term, removing the tax risks restricting flows from China and increasing prices. However, with limited capacity for production growth elsewhere, Chinese producers may have the opportunity to pass tax costs on to international customers.

Domestically, reduced exports of aluminum products could help ease tensions in the aluminum supply chain. China’s production is approaching the annual capacity cap, ensuring the country’s self-sufficiency in the coming years, as demand from the green energy sector is expected to increase. China has more than 80% of the world’s solar power generation capacity. The International Energy Agency (IEA) expects China to account for almost 60% of global installed renewable energy capacity between 2024 and 2030.

In the longer term, this policy shift could lead to further changes in global trade dynamics, benefiting other commodity producers as countries attempt to diversify their commodity dependence on China.