LONDON- Aluminum prices surged on Friday after China said it would cancel export tax rebates, fueling worries that a heavy flow of shipments abroad may be curbed.
Three-month aluminum on the London Metal Exchange soared as much as 8.5 percent to $2,730 a metric ton and was up 5.6 percent at $2,658.50.
At its peak on Friday, the lightweight metal came within a whisker of a five-month high of $2,732 hit last week on supply disruptions of bauxite and alumina, the raw materials to make primary aluminum.
China’s finance ministry said on Friday it would cancel export tax rebates for aluminum and copper products, effective Dec. 1.
“If you’re not awarding rebates then more metal remains domestically in China and it could tighten the market in the rest of the world,” said Nitesh Shah, commodity strategist at WisdomTree.
China exports 4-6 million tons annually of semi-fabricated aluminum, amounting to about 7 percent of global supply, JP Morgan said in a note.
Analyst Ross Strachan at consultancy CRU said the longer term impact was less clear cut. “It will encourage growth in exports, and hence production, of finished goods in China and in due course China may need less primary (aluminum) imports.”
