China’s tax policy reforms propel mining gains; USD strength could pose risks

Citi, the leading global bank for institutions with cross-border needs, a global provider in wealth management, and a U.S. personal bank highlighted the move's implications, noting that removing the rebate will likely discourage the export of aluminium semi-finished products from China.

According to the bank, this policy shift is expected to initially raise the LME-Shanghai Futures Exchange (ShFE) ratio.

However, Citi tempered expectations for a sustained rally, pointing to the potential dampening effect of a stronger U.S. dollar in the months ahead. Analysts predict that while short-term price increases are likely, the long-term strength of the aluminium sector could face challenges as global currency dynamics come into play.

The decision by Beijing marks a significant moment for the global metals market, further intensifying the interplay between Chinese policies and international trade flows.

Citi Bank further stated that it is maintaining its 0–3-month aluminium price forecast at $2,600 per tonne (with a 4Q24 average of $2,500 per tonne). The bank anticipates that the bullish sentiment driven by the removal of tax rebates may subside, tariff concerns are likely to intensify in the coming weeks, and a resolution to Guinea's bauxite shipment challenges remains its base-case scenario.