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Can Alcoa Continue Its Good Run in 4Q17?

PART:
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Part 5
Can Alcoa Continue Its Good Run in 4Q17? PART 5 OF 8

Chinese Aluminum Demand Indicators Offer Mixed Signals

Chinese aluminum demand indicators

Since China is the largest aluminum consumer, it’s important for investors in companies like Alcoa (AA), Century Aluminum (CENX), and Norsk Hydro (NHYDY) to keep track of the country’s aluminum demand (ACH) (FXI). In this part, we’ll look at some of China’s recent aluminum demand indicators.

Chinese Aluminum Demand Indicators Offer Mixed Signals

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Indicators

  • China’s August manufacturing PMI (purchasing managers’ index) was better than expected. A private survey conducted by Caixin read 51.6 in August, which is a six-month high.
  • However, China’s August trade data were a mixed bag for investors. While China’s exports missed consensus estimates, its imports were better than expected. Higher imports suggest strong domestic demand in China’s economy.
  • Fixed asset investment and real estate sectors are among the biggest aluminum consumers. China’s fixed asset investment growth slowed to 7.8% between January and August—compared to 8.3% in the first seven months of the year. It was the lowest growth rate in 18 years. The data were worse than expected. China’s August industrial output and retail sales also missed consensus estimates.
  • According to the China Association of Automobile Manufacturers, auto sales in China rose 5.3% year-over-year to ~2.2 million vehicle units in August. The country’s car sales have defied the purchase tax hike that came into effect at the beginning of the year. Notably, Chinese car sales are growing at a time when we’re seeing moderation in US car sales.

Mixed signals

Overall, China’s aluminum demand indicators provide us with a mixed picture of the country’s aluminum demand. We also need to look at aluminum’s supply. In the next part, we’ll look at aluminum production data in August.

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