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SHFE base metals prices broadly down; China to implement VAT cut on April 1

Base metals prices on the Shanghai Futures Exchange were mostly down during the morning trading session on Friday March 15, with the complex reacting to news that China will cut its value-added tax (VAT) rate for manufacturing and other sectors on April 1.

Speaking to reporters at the close of the annual meeting of the National People’s Congress in Beijing on Friday morning, Chinese Premier Li Keqiang said that the VAT rate for the manufacturing sector will be cut to 13% from 16% at the beginning of next month.

The news came somewhat as a surprise to market participants, who had been expecting the new rate to come into effect from May 1 instead.

“The market widely believed that VAT will be lowered in May, but it has come earlier than expected,” a copper trader based in Beijing told Fastmarkets.

“Base metals prices on the SHFE have a VAT rate [of 16%] already priced in so after it was announced that the VAT cut would come sooner than expected, SHFE base metals prices have came under pressure,” a Shanghai-based copper trader said.

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