China’s November Trade Data Concern Alcoa



China’s November trade data

On December 8, China’s customs department released the country’s trade data for November. In dollar terms, China’s imports fell 8.7% in November compared to the same period last year. The slowdown in imports points to the continued slowdown in the Chinese economy. China’s exports also registered a YoY (year-over-year) fall of 6.8% in November in dollar terms. Falling Chinese exports are negative for the global economy. It points to a slowdown in the global demand.

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Aluminum exports

China’s dismal November trade data are negative for commodity producers including Alcoa (AA), BHP Billiton (BHP), Rio Tinto (RIO), and Norsk Hydro (NHYDY). However, for the aluminum industry, the steep rise in Chinese aluminum exports is concerning. In November, China (FXI) exported 450,000 metric tons of unwrought aluminum—a YoY (year-over-year) rise of almost 15%. China’s November exports are the highest since December 2014.

The steep rise in China’s November aluminum exports is in contrast to what we saw in the last few months. Before November, China’s unwrought aluminum exports registered a YoY fall for four consecutive months.

In the first 11 months of 2015, China exported 4.3 million tons of unwrought aluminum. This represents a 14% rise compared to the same period last year.

Fake semis?

According to US aluminum producers including Alcoa and Century Aluminum, Chinese companies export “fake semis” to take advantage of China’s tax regime. This encourages the export of value-added aluminum products. China has a prohibitive 15% tax for the export of primary aluminum products. However, aluminum producers allege that Chinese companies are disguising primary aluminum as semifinished aluminum to evade the export taxes.

In the next part, we’ll look at the recent trend in physical aluminum premiums.


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