Chinese Aluminum Exports Impact More Than Just the U.S.

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We tend to view the issue of China’s excess aluminum manufacturing capacity through the simple lens of its impact on the U.S. and European markets, but comments in a recent Aluminium Insider article show that the flood of low-cost aluminum from the People’s Republic of China is having a global impact.

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Markets like the U.S. and EU have mechanisms they can swiftly employ to counter a rising tide of cheap imports as the U.S. has shown, but some developing countries are still struggling months or years after western markets have already put some form of protection in place.

Despite repeated requests made to the government by some private sector primary aluminum producers like Hindalco and Nalco to impose anti-dumping tariffs on imports of primary aluminum and scrap, an Indian aluminum trade organization spokesman dismissed such claims as simply an attempt to profit by raising import prices.

What are We Agarwailin’ About? 

Anil Agarwal — a ‘patron’ of the Aluminum Secondary Manufacturers’ Association, according to AI, not the eponymous chairman of Vedanta Resources — is quoted as saying that the import of 17,000 metric tons in ingot and wire rod is so small in a market with a production capacity of 4 million metric tons, half of which is exported, that imports have a negligible impact on domestic mills. He is quoted as going on to challenge the notion that increasing scrap imports is undesirable, as suggested by many.

Referring to an increase of 29% over a three-year period, Agarwal noted imported scrap is typically used in automotive and detox applications where primary aluminum is cost-prohibitive. Rising scrap imports should be seen as a positive sign of the health of these industries rather than a worrying undermining of primary producers’ positions. Pointing to a 21% increase in primary metal exports between April and September of this year, jumping from 638,000 metric tons last year to 772,000 metric tons this year, he suggested Indian primary producers remained competitive in the international marketplace despite China.

The problem, though, is not just the excess Chinese downstream capacity but even more so of displaced capacity that had previously served the U.S. market (much like U.S. concerns over the health of the domestic downstream manufacturing sector), Agarwal raised concerns that India’s downstream semi-finished manufacturing capacity was under threat of substitution from cheap Chinese imports if action wasn’t taken.

Over the past seven years, imports of downstream products into the Indian market have grown at some 12% per year as a result of which the market share for imports as a percentage of domestic consumption has increased from 40% in 2011 to 60% now, a further article reports.

Whether India will impose anti-dumping or raised tariffs on China’s semi-finished aluminum products remains to be seen. Narendra Modi has his hands full with state elections at present that are not going well for him personally or his party, and do not bode well for upcoming national elections in the spring of next year. On the other hand, maybe picking a trade fight with India’s old adversary is just the sort of distraction he may welcome to divert attention.

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Correction: We were misled by the original Aluminium Insider article, which did not clarify the difference between the two Anil Agarwals, and thus we initially stated that the Agarwal mentioned in that article was indeed the Vedanta chairman – which he is not. Read their correction here.

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