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China’s Aluminum Exports Rise 20% Year-Over-Year in May

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Jun. 22 2015, Updated 12:07 p.m. ET

China’s aluminum exports

In the previous parts of the series, we explored the recent movement in aluminum prices and physical premiums. In this part, we’ll discuss China’s aluminum exports. China’s custom department has recently released May trade data. China’s exports registered a year-over-year (or YoY) decline of 2.5% in May. Decline in Chinese exports is negative for the global economy, as it points to a global demand slowdown.

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Unwrought aluminum exports

The previous chart shows the latest trend in unwrought aluminum exports from China. Unwrought aluminum is a basic form of aluminum. In May, China exported 410,000 tons of unwrought aluminum, a YoY increase of 20%. China’s aluminum exports have been on an uptrend, increasing 35% YoY in the first five months of the current year.

However, May aluminum exports have fallen ~6% as compared to April. Lower aluminum prices and physical premiums act as a dampener for Chinese exporters.

Higher Chinese aluminum exports pose a challenge to the delicate balance in aluminum markets. Aluminum producers like Alcoa (AA) and Rio Tinto (RIO) have curtailed some of their smelting capacity in order to restore supply discipline.

Alcoa and RTI Metals (RTI) together make up 4.1% of the SPDR S&P Metals and Mining ETF (XME).

China relaxed export duty

Earlier this year, China (FXI) relaxed its aluminum export norms. It removed the 15% export duty on certain aluminum products. This raised concerns that China’s aluminum exports could increase further in the coming months.

Another reason driving Chinese aluminum exports has been its weak domestic demand. In the next part, we’ll analyze some indicators of China’s aluminum demand.

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