This month the Aluminum Monthly Metals Index (MMI) remained flat for this month’s index value, as the SHFE aluminum price and its LME counterpart trended sideways this past month.
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SHFE, LME prices’ behavior
The SHFE aluminum price has traded sideways since mid-July. The price is averaging CNY 14,661/mt over the past three months.
By August, the LME aluminum price started to follow the sideways trend as well, averaging $1,777/mt since then.
However, the SHFE aluminum price continued to move higher than its LME counterpart.
Throughout September, SHFE prices were approximately $370/mt higher than the LME price.
The arbitrage continues to promote imports in China, making it a net importer for a second consecutive month in August. This trade flow indicates large demand for aluminum in the Chinese market, which is well on its way to economic recovery.
The current state of trade raises the question: how much longer can China continue to export semi-finished metal if its cost base is approximately $370/mt over the LME? Are mills selling at a loss (or are they subsidized)?
Tariffs against China
China accounts for approximately 55% of global aluminum production.
Despite it being a net importer for the past few months, China is still a huge exporter of aluminum downstream products. Chinese exports caused other large markets to contemplate restrictions on Chinese aluminum imports.
Currently, India is seeking to develop policies to protect its own domestic production. India’s first measure might require every importer to obtain a license from the government for every shipment. Even though the measure applies to exports from all origins, the Federation of Indian Mineral Industries pointed out most of the country’s imports come from China.
Meanwhile, the European Commission imposed provisional anti-dumping duties on aluminum products from China, with duties reaching as high as 48%. The Commission opened an investigation in February after it suspected China of dumping aluminum extrusions.
The director general of the European Aluminium Association said the duties were not only crucial for the survival of the domestic aluminum market but also for a greener regional economy.