Is the Aluminum Rally Over as Chinese Exports Refuse to Die Down?


Dec. 11 2017, Updated 3:25 p.m. ET

Chinese exports

In the previous part, we looked at China’s November steel exports. Like steel, aluminum is grappling with the issue of global oversupply, especially in China. China is curtailing some of its aluminum capacity to address the country’s rising pollution levels. However, while China’s capacity cuts are reflected in its steel exports, its aluminum exports paint a slightly different picture.

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Exports have risen

Last month, China exported 380,000 metric tons of unwrought aluminum, which is similar to the corresponding month in 2016. In the first 11 months of 2017, China’s aluminum exports totaled ~4.4 million metric tons, which is 3.8% higher than the same period in 2016. That’s in stark contrast to steel, for which Chinese exports have been on a falling trend.

Notably, one of the factors that fueled aluminum’s rally in the first half of 2017 was expectations of lower aluminum production in China due to capacity cuts in the winter months. Aluminum (NHY) was among the best-performing industrial metals in the first half of the year. The lightweight metal outperformed several other industrial metals, including copper, in the first half of 2017. However, aluminum prices came under pressure last month. After falling ~5% in November, aluminum has been trading weakly this month also. Alumina (AWC) prices have also shown a weakness after hitting their all-time high in October. Aluminum producers Century Aluminum (CENX), Alcoa (AA), and South 32 (S32) have also followed lower aluminum prices.

Here’s the question we should ask: Why haven’t we seen a decline in Chinese aluminum exports like we have seen for steel? After all, China plans to curtail its excess capacity in both of these industries. We’ll look at that in detail in the next part.


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