A relatively swift exit from pandemic lockdowns and the impact of stimulus-led infrastructure investment have powered China’s metals rebound. Furthermore, the Shanghai Futures Exchange has continued its summer disconnect from the London Metal Exchange aluminum price, which started in April of this year.
The resulting arbitrage window has sucked in imports of aluminum primary and remelt alloy casting ingot. As a result, China’s imports are at levels not seen since the aftermath of the financial crisis in 2009.
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China leads the metals rebound as aluminum imports surge
Combined imports of primary metal and unwrought alloy totaled 393,000 tonnes, just shy of the previous record of 394,000 tonnes in April 2009, according to Reuters. Furthermore, cumulative net imports reached 653,000 tonnes so far.
Alloy imports should be seen as in part as a replacement for lower scrap imports. However, even so, the disconnect has continued through the third quarter. Although that disconnect is expected to narrow in the run-up to year’s end, it underlines the current two-speed nature of the global manufacturing economy.
Meaning, there’s China and then there’s the rest of the world.
China tightened up on scrap grade import controls last year and precipitated a switch to imports of refined remelt alloy over scrap, even before the pandemic took hold.
Southeast Asian regional remelters have taken in the displaced scrap and exported alloy ingot to China. A similar trend is taking place with copper scrap and alloy ingot, possibly suggesting a structural shift that is here to stay.