The SHFE’s front-month aluminium price climbed to its highest since October 2018 at 14,225 yuan ($2,113) per tonne on Thursday April 25, an increase of 7.7% or 1,015 yuan from the 2019 low of 13,210 yuan on January 14, prompting market participants to question what is buoying the market.
While the SHFE aluminium price has largely trended upward since the start of this year, an announcement by Chinese authorities in mid-March that the VAT rate paid by the country’s manufacturing sector would drop to 13% from 16% from April 1 sparked a quicker run-up in prices.
Market participants, particularly traders, sought to stockpile material ahead of April 1, enabling them to be able to sell the material after that date while paying the new lower VAT rate of 13%, thereby netting a healthier profit. The rush to stock up on aluminium ahead of April 1 propelled the price higher.
But the initial...