China’s aluminum exports
In the previous part, we saw that China’s aluminum exports more than doubled in February compared to last year. China is the world’s largest consumer of aluminum, but China has not been a big player in global aluminum trade.
In this part, we’ll look at why China’s aluminum exports have been rising.
How capacity increased
China’s aluminum exports are increasing because China increased its aluminum smelting capacity multifold over the last ten years. China imported almost a quarter of its aluminum demand in 2000. It lacked raw materials required for aluminum production. Aluminum production requires a lot of energy, and China doesn’t have access to sources of cheap energy.
Aluminum companies around the globe expanded their capacities to cater to the growing Chinese demand for aluminum. Meanwhile, China increased its aluminum smelting capacity. Between 2000 and 2013, Chinese aluminum capacity increased by more than 11 times.
China consumed most of its own aluminum since aluminum demand in China was growing in the high double digits.
In the last several quarters, there has been a visible slowdown in the Chinese economy. Consumption of all industrial metals such as steel, copper, and aluminum has been negatively impacted as a result of this slowdown.
Despite the slowdown, China still continues to add aluminum capacity, as you can see in the above chart. Other major aluminum producers such as Alcoa (AA), BHP Billiton (BHP), Vale S.A. (VALE), and Rio Tinto (RIO) have curtailed aluminum capacity over the past few years. Alcoa currently forms 4.01% of the SPDR S&P Metals and Mining ETF (XME).
China’s aluminum demand has not kept pace with the rising capacity. In the next part, we’ll analyze the aluminum demand indicators in China.