China will stop levying import taxes on alumina and refined copper from 1 January to meet growing domestic demand for the metals, the Ministry of Finance (MoF) announced yesterday.

China currently imposes a 2% import tax on refined copper, and a 3% import tax on alumina though Chilean refined copper is already exempt from tax due to a free trade agreement between Chile and China.

The MoF also announced that the government will maintain the current 10% export tax on refined lead next year, while exports of 0# refined zinc (>=99.995%) will continue to be exempt from tax. There had been market speculation that Beijing would impose a minimum 5% export tax on 0# refined zinc and increase export tax of refined lead to 15% next year.

"Theoretically, international copper prices will go up, driven by an increase in China's refined copper imports once the tax is removed," Li Yusheng, analyst with Beijing Antaike said.

"An ample supply of refined copper on the domestic market was maintained this year due to a jump in copper imports in the first five months. This was facilitated by international prices being lower than domestic prices, as well as low domestic stockpiles during the period," Li said.

Duan Shaofu, an official with the China Nonferrous Metals Industry Association (CNMIA) said the cancellation of the import tax would help alleviate the pressure of high import costs on downstream users.

"However, the current high copper stockpile reflects oversupply on the domestic copper market. More imports will further increase this," Duan said.

"If the price difference is not favourable enough for traders to make a profit, then we won't see a substantial increase in copper imports next year. After all, domestic copper supply has outpaced demand so far," Antaike's Li said.

China imported 103,410 tonnes of refined copper in November, up 55.8% from the same month last year. Imports for the first 11 months hit 1.38 million tonnes, surging 89%, according to statistics from the General Administration of Customs.

Analysts have previously said that the removal of the import tax may put pressure domestic alumina producers once imports increase and alumina demand dips after Chinese New Year.

Currently, imported alumina CIF prices at China's ports are between $460 and $470 a tonne.

China imported 373,969 tonnes of alumina in November, down 42.6% year-on-year, and imported a total of 4.8 million tonnes in the first 11 months of 2007, falling 24.6% on an annual basis.