When the largest aluminum producer on earth keeps reporting high import figures, the world sits up and takes note.
According to figures released by the Chinese General Administration of Customs a few days ago, China recorded a new high for aluminum imports in March 2021.
Stop obsessing about the actual forecasted aluminum price. It’s more important to spot the trend.
China aluminum imports surge in March
Imports went up 40.8% from February 2021, taking first quarter imports to a total of 661,517 tons. The quarterly total marked an increase of 118.8% from the same period in 2020.
China has been on this aluminum importing spree since July 2020. China’s aluminum imports last year, including primary aluminum and unwrought alloy, surpassed the previous annual record set in 2009.
What’s more, Shanghai aluminum prices last week were at their highest since 2010. China had bought in record volumes of the metal in 2020, riding on an uptick in domestic demand. Strong demand pushed the Shanghai prices higher than London prices, opening an arbitrage window for cheaper overseas metal.
According to a Reuters report, the Shanghai Futures Exchange (ShFE) aluminum contract consistently outperformed international prices amid high volumes and open interest. The London Metal Exchange (LME) three-month aluminum price is also on an upward trajectory, hitting a fresh yearly high of US $2,394 per ton Tuesday.
In 2018, it had touched a peak of US $2,718 per ton.
China aluminum imports and scrap guidelines
It all started in 2019, when China’s aluminum output dropped due to low prices. In Q1 2020, production rose marginally, even as domestic prices surged.
Then, the COVID-19 pandemic hit and negatively impacted domestic aluminum production.
Just like China’s steel sector, new energy and environmental laws have affected its aluminum production. Operating lines in the Inner Mongolia province negatively impacted production, even though new capacity — about 500,000 tons — has come online.
Producers have to also deal with new scrap guidelines and import codes. The government’s guidelines aim to reduce construction waste.
The pandemic impacted secondary scrap used in some forms of alloy the most. Then the import code to halt the influx of poor scrap and replace it with high-purity material has compounded the problem for China.
Cumulative scrap imports of 680,000 tons so far this year are down 48% year-on-year.
Now, with China on the path of recovery from COVID-19, including a strong surge in the automotive and construction sectors, local demand is up again.
All of this has meant one of the world’s largest producers of aluminum has relied on imports from the second quarter of last year to meet the shortfall between domestic and foreign supply.
So coming back to the record March imports, China imported 206,556 tons of unwrought aluminum & products in that month.
Korea, Japan lead list of China aluminum import partners
According to figures from TrendEconomy, the top source of China aluminum imports was South Korea, with a share of 14% (US $1.14 billion).
Japan came in second at 12.9% ($1.05 billion), followed by Malaysia (10.2%, 832 million US$), Rounding out the top five are Russia (9.58%, $780 million) and India (7.9%, $643 million).
The United States came in at No. 6, at a share of 6.75% and a value of $550 million.
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