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China’s May Trade Data: Mixed Bag for Metal and Mining Investors

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China’s May trade data

On June 10, China released its trade data for May. The country’s trade data is especially crucial for metal and mining investors due to the country’s dominant share in global metal consumption. Overall, China’s May trade data offered mixed signals to markets.

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Steel

China exported 5.74 million metric tons of steel last month—a year-over-year (YoY) fall of 16.6%. China’s imports fell on a monthly basis. In absolute terms, China’s imports were the lowest since February. Chinese steel exports are seen as a challenge by steel companies globally including in the US. While US steel companies like U.S. Steel Corporation (X) and AK Steel (AKS) have protection in the form of the Section 232 tariffs, their counterparts globally, especially in developed countries, are seeking trade actions to stem the flow of steel imports. ArcelorMittal (MT) cut its Europe steel production twice in May due to weak demand and higher imports. ArcelorMittal gets almost half of its revenues from Europe.

Aluminum

While China’s steel exports fell on a YoY and a monthly basis last month, its aluminum exports continued to increase. Last month, China exported 536,000 metric tons of unwrought aluminum—a YoY rise of 11.7%. In the first five months of 2019, China has exported almost 2.5 million metric tons of unwrought aluminum, which is 12.8% higher compared to the same period in 2018.

US aluminum stocks including Alcoa (AA) and Century Aluminum (CENX) have sagged despite the 10% tariff on US aluminum imports. Despite the tariffs, the US continues to import most of its aluminum requirements. The country’s aluminum capacity is short of the domestic demand. When President Trump imposed the Section 232 tariffs last year, Alcoa requested that the administration address the core issue of Chinese overcapacity. Chinese aluminum exports have risen sharply over the last year. China’s exports appear to be on track for another record year in 2019.

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