Yahoo Finance Must-Know: Chinese Aluminum Exports Rise in April
Why Recent Aluminum Industry Indicators Are Concerning Investors
Chinese aluminum exports
China’s customs department released the trade data for April, which showed a year-over-year (or YoY) decline of 6.2% in exports. Decline in Chinese exports is negative for the global economy, as it points to a global demand slowdown. While China’s merchandise exports are declining, exports of aluminum and steel have continued to surge.
Exports rise
The previous chart shows the latest trend in unwrought aluminum exports from China. Please note that unwrought aluminum is a basic form of aluminum. In April, China exported 430,000 tonnes of unwrought aluminum, a YoY increase of 28%.
In March, China’s aluminum exports declined by 3% YoY. This raised expectations that China might plug in the loopholes wherein Chinese exporters disguise primary aluminum products as semi-finished. China has a preferential export policy for value-added aluminum products. As per Alcoa (AA), a lot of primary aluminum is getting exported from China to take advantage of this preferential tax policy.
Alcoa and Century Aluminum (CENX) together make up ~1% of the North American Natural Resources ETF (IGE). Crown Holdings (CCK) forms 0.4% of IGE.
A threat to the aluminum industry
Rising aluminum exports from China pose a threat to global supply balance. Apart from China, all other major aluminum producers have curtailed aluminum capacity. As per recent reports, Rio Tinto (RIO) has put some of its Australian aluminum assets on sale. Globally, aluminum companies are looking at exiting high cost smelters, in a bid to improve their cost positioning in the industry.
Aluminum premiums have fallen victim to higher supply resulting from the surge in Chinese exports. In the next part, we’ll analyze the recent movement in US Midwest aluminum premiums.
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