Export Rebate Rate of Nonferrous Products will be Lowered,Intending to Promote Integration of the Nonferrous Industry

Reporters of the “Economic Information Daily”have learned through interview that the state government is preparing to speed up the integration of nonferrous industry through adjustment of taxation policy.

In the near future the Ministry of Finance will adjust the export rebate rate of some nonferrous products, with the focus placed on products related to lead, zinc, and aluminum which needs high energy consumption, and whose industry condition is disorderly and widely distributed.Wherein, the export rebate rate of aluminum extruded products in aluminum processing industry will be lowered from the current 13% to 9%. For large scale nonferrous metal enterprises with intensive operation, the Ministry of Finance will offer partial taxation support in the sales and purchasing of bulk raw materials,it is expected some actions will be taken in June and July.

Regarding this policy adjustment, related enterprises and departments also held different views. “Because the Ministry of Commerce,the Ministry of Industry and Information Technology have expressed firm objection, this time’s rebate adjustment document of the Ministry of Finance will no longer be countersigned.” said one authoritative person in the industry.

One chief person of an aluminum processing enterprise told the reporter of the “Economic Information Daily” that because countries like the US and Canada all imposed anti-dumping measures on aluminum extruded products, on the other hand currently many domestic aluminum extruded products hope to develop surrounding markets, once there is adjustment in rebate, there will be considerable negative impact.

However, these different opinions could hardly prevent the implementation of a package of policies; after all it reflects the intention of the state government in the integration of nonferrous industry. “The Ministry of Finance started relevant study since the fourth quarter last year, the guiding thought is to promote the integration of resource category industry like nonferrous metal industry through the practice of ‘taking protective or suppressive measures’in taxation policy” Said the above-mentioned person.

He further explained that on the one hand, by reducing export rebate, related industries will have to lengthen budget cycle, so as to increase the gap between some backward small enterprises and enterprises in intensive operation.On such basis, the government will further introduce corresponding finance and taxation policies to support large enterprises in the industry, and quicken the pace of these advantageous enterprises to grow bigger and stronger,and forcefully promote industry integration.

“In the recent several years, nonferrous and other resource processing enterprises widely experienced the pressure from huge fluctuation in the international prices of bulk commodity,the lack of international power of speech is also an important motive to introduce a series of above-mentioned policies.” said this person.

Although China is a top producer of nonferrous metals in the world, its output of ten major nonferrous metal varieties last year has reached 31,350,000 tonnes, China’s influence and control power in the nonferrous industry obviously conflicts with its status as a top producer.“The majority of global nonferrous metal mineral resources are controlled by a few countries, most of the nonferrous metal prices are manipulated by several oligarchs, most profits are retained in the hands of a few multinational corporations, most technology patents are controlled by developed countries.” Chen Quanxun, the newly appointed Chairman of the Nonferrous Association, exclaimed during an address at an internal conference. “We have paid heavily in terms of resource, energy, and environment, but in the end can only share a small portion of the cake.”

According to data of the Nonferrous Association, during the “Eleventh Five Year” period, China’s investment in nonferrous metal industry grew by an annual average rate of 32.7%; income from main business grew by 29.4%, whereas profit growth is only 18.2%,which is far lower than investment growth. According to initial calculation, last year the profit to sales ratio of the whole industry is only around 4.8%.

According to industry insiders, the low profit rate of the nonferrous industry is mainly due to low industry concentration degree, which leads to limited resource control power.

On the same occasion Chen Quanxun indicated that in the next five years, in order to achieve development in the nonferrous industry, firstly we must strive to improve resource control power, secondly we must strive to improve market influence. When speaking of improving market influence, he said that the industry must increase industry concentration degree, and foster large multinational group corporation.

Such statement from Chen Quanxun also described the overall competition situation in the domestic nonferrous industry. According to statistics from the China Nonferrous Metals Industry Association, judging from ownership,the percentage of total asset amount of stateowned and state-controlled enterprises in the total assets of nationwide nonferrous enterprises with annual output value above 5 million yuan dropped from 74% in 2000 to 42% in 2010, the ratio between sales and revenue dropped from 55% in 2000 to 30%. However,judging from industrial chain, mines and smelting enterprises are dominated by state-owned enterprises, most processing enterprises are private-owned enterprises.

Against the background of a huge number of domestic small and medium enterprises, and wisely distributed competition, the global resource control power of China’s nonferrous industry is weak. International merger efforts by Chinese invested enterprises encountered frequent setbacks, nonferrous metal trade friction escalated, prices fluctuated violently……Not a few industry insiders one after another have appealed that such patterns of extensive expansion, low industry concentration degree, and passive existence as a resource power, need urgent change.