Yesterday, I had the chance to visit a producer of grain refiners and master alloys for the aluminium industry. This was a very well run plant, with a good focus on quality.
The plant sells more than 30% of its production to overseas markets, including USA, Europe and the Middle East.
But I got a surprise when touring the factory. Their stocks of raw material, namely aluminium 25kg ingot awaiting melting, was mostly labelled “Product of Nalco India.”
I asked the General Manager why he buys metal from India when he has so many suppliers to choose from much closer to home. His answer – he uses imported metal to make his export orders.
There is a 15% export tarrif on exports of unalloyed metal, but none on alloyed metal, which his metal clearly is. But there is also a domestic sales tax of 17% on domestic metal purchases, which he can avoid by effectively tolling the imported metal.
The grain refiner industry is not big enough to make a serious impact on total metal imports and exports. We estimate China’s exports of grain refiners and master alloys is probably around 20,000t. But this particular plant is owned by a company that makes alloy wheels for the auto industry worldwide. The wheel factory we saw yesterday, while visiting the grain refinery factory, produces 2.8 million wheels per year, mostly for the export market. Although the plant is one of 6 that the company owns, they told me that they are only the third largest producer of alloy wheels in China. That’s a lot of export metal.