UPDATE 2-China to scrap taxes on re-export of some metals

(Recasts, adds comments)

By Polly Yam

HONG KONG, Jan 5 (Reuters) - China will eliminate taxes on imports of copper, nickel and cobalt concentrate, as well as on exports of the finished metals and aluminium products, from Feb. 1, in a move that promises to boost the country's metals exports.

China, the world's top consumer of copper and aluminium, will reverse a two-year old policy of taxing these flows, in a bid to spur domestic demand, analysts and smelter officials said on Monday.

The policy will allow selected smelters, such as Jiangxi Copper (0358.HK) (600362.SS), to import concentrates duty-free as long as they export the finished product.

Copper and nickel concentrate imports are currently subject to a 17 percent value-added tax, and exports of refined copper and unwrought nickel are taxed at 10 percent and 15 percent respectively.

China will allow duty-free exports of refined copper, unwrought nickel, semi-finished aluminium products such as profiles, rods, bars and billets, and cobalt powder, the Ministry of Commerce said on its website (www.mofcom.gov.cn).

"The policy is reflecting the year-long request by smelters," said Yang Changhua at Antaike, a state-owned research group in Beijing.

"It would help smelters that currently import concentrates and sell the finished metal at below-cost prices at home."

The move also suggested that Beijing was trying to save smelters, amid the global financial crisis and weak domestic consumption, he added.

China's copper consumption growth is expected to fall this year from last year, Yang said.

Antaike has adjusted down its growth forecast to 2.1 percent this year from the previous forecast of more than 6 percent, he said.

For 2008, Antaike estimates consumption rose 5.4 percent, lower than the previous estimate of more than 8 percent.

Pan Qifang, Jiangxi Copper's spokesman, said the policy would allow the firm to hedge imports of concentrate on the London Metal Exchange and to export refined copper if LME prices were higher than the domestic market.

"The gap between LME and domestic prices would be narrowing," Pan told Reuters.

The duty-free policy would also reduce the cost of financing imports to smelters, he added.

The policy on exports of semi-finished aluminium products could increase imports of primary aluminium ingots for manufacture of such duty-free exports, traders and smelter officials said.

Higher exports of such products which would boost operations at labor-intensive fabricating plants, and save jobs.

"Fabricating plants will have another channel to sell their products," a trading manager at one large smelter said.

But weak overseas demand for Chinese aluminium products may keep exports of such products low in the first quarter, said one manager at a fabricator plant in Nanhai city in Guangdong province, home of dozens of aluminium products plants.

"If the policy came in early 2008, we would have made good money," he said. (Editing by Clarence Fernandez)