By Ida Chen
Shanghai. November 12. INTERFAX-CHINA - The Chinese government is considering canceling the current 5 percent value-added tax (VAT) export rebate and imposing a minimum 5 percent export tax on 0# refined zinc (>=99.995 percent) in January next year, in order to slow investment growth in zinc smelting projects and curb the country's huge trade surplus, industry insiders told Interfax today.
"The policy is still being discussed by relevant government departments and major smelters. However, as smelters, we hope the existing policy can be retained," a senior official, surnamed Wang, from the trading department of Hunan Zhuzhou Smelter Group, China's leading zinc smelter, said.
Wang expressed concern that the policy may burden domestic zinc smelters with unprecedented difficulties. "The domestic zinc smelting sector will face the same problems as the lead smelting sector is currently facing," he added.
The policy will result in a significant drop in China's zinc exports and tight global supply, which will in turn dramatically increase both global zinc prices and zinc concentrate prices. Domestic zinc smelters will have no choice but to accept soaring imported concentrate prices, and will probably be forced to reduce production, Wang explained.
Zhu Yiman, an analyst from Commodity Business Intelligence China, a Shanghai-based commodity market service provider told Interfax that "it is only a matter of time before the government cancels the VAT export rebate on 0# zinc, as other types of refined zinc, namely 1# zinc (>=99.99 percent but <99.995>(<99.99>
Zhu further commented that major smelters met with government departments last Friday to discuss policy feasibility, but no details have been released to date.
0# zinc is the standard form of zinc on both the London Metal Exchange and the Shanghai Futures Exchange, and accounts for the majority of China's zinc exports.
China imported 104,729 tons of zinc in the first nine months of this year, slumping 56.1 percent from the same period last year, while exports climbed 43.7 percent to 248,233 tons. As a result, net exports reached 143,504 tons. Exports in September tumbled by 44.03 percent from August to 12,325 tons, down 18.5 percent from the same period last year.
The country produced 2.696 million tons of refined zinc in the first nine months, up 19 percent year-on-year, creating ample supply that has dragged zinc futures to record lows since their debut on the Shanghai Futures Exchange in March this year.
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