China to let more smelters import taxed alumina

China, poised to cancel tolling and processing of aluminium within three months, will allow more of its largest and most efficient smelters to import their main raw material to cover a looming shortage. But scrapping tolling and processing, allowing smelters to import alumina duty-free as long as they export the end product, would still halve the number of importers in China to about 15. Minmetals, Chalco and six other smelters are the only firms who regularly receive permits to import alumina for processing into aluminium for either domestic or overseas sale. Some of a further 20 smelters currently importing alumina for tolling and processing will soon be granted similar permits. Production under these permits attracts an 8% import tariff on the raw material and a 17% value-added tax on the output, missing out on the tax breaks for imports wholly dedicated to exports.

China plans to end tolling and processing, which currently uses about 30% of its imported alumina, to reserve more of its aluminium output. The ban on tolling and processing is expected to be enforced from July 1. Beijing may allow smelters with annual capacity of 100ktpy and approval from the powerful State Development and Reform Commission to join those companies already permitted to import alumina. Smelters that do not meet the requirements would be given time to improve. The State Development and Reform Commission is asking selected smelters to submit information by May 15. Environmental and land permits are also required. The Ministry of Commerce had already selected 11 smelters, including Wanji Aluminium Co., Zhongfu Industry Co. Ltd. and Sanmenxia Tianyuan Aluminum Co. Ltd., as possible importers. The other smelters currently allowed to import alumina not for tolling and processing are Lanzhou Aluminium, Yunnan Aluminium, Jiaozuo Wangfang Aluminium, Baotou Aluminium, Shanxi Guanlu and Qingtongxia Aluminium. Industry sources said the government might allow smelters holding 2005 contracts to extend the provisions until Oct. 1, while smelters with multi-year contracts would be allowed to meet their commitments. (Reuters - 05/10/05)