China has announced significant changes to its export tax rebate policy, set to take effect on December 1, 2024. This decision will eliminate the 13% tax rebate on exports of aluminum, copper, and biofuel feedstocks, which has raised concerns about potential reductions in trade flows. The finance ministry's announcement has sent shockwaves through global markets, particularly affecting aluminum prices, which surged by 8.5% on the London Metal Exchange following the news. Analysts suggest that this move could lead to inflationary pressures in the aluminum market, compounding existing price increases.

The implications of this policy shift are profound for various industries. China is the world's largest producer of aluminum, accounting for approximately half of global production in 2023. With reduced export rebates, analysts predict a return to a deficit in the global aluminum market by 2026, as few countries can ramp up production to fill the gap left by decreased Chinese exports. This situation could significantly impact sectors reliant on aluminum, such as automotive and construction, where higher costs are expected to be passed on to consumers.

Additionally, the biofuels sector is bracing for challenges as the end of tax rebates for used cooking oil feedstock could lead to increased prices and tighter margins for producers. European buyers, who rely heavily on imports from China, are already reporting steep price hikes due to fears of shortages. As markets adjust to these changes, stakeholders across various industries will need to reassess their strategies in light of the evolving landscape of commodity exports from China.

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