9 Feb

Has Aluminum Found a Way to Live with Higher Chinese Exports?

WRITTEN BY Mark O'Hara FEATURED IN Commodities

Chinese exports

As we noted previously, Chinese steel exports fell to a five-year low last month. During the winter months, China’s curtailing its polluting industrial capacity in several industries including steel and aluminum in a bid to address rising pollution levels. We have seen the capacity cuts impact China’s steel exports. However, China’s capacity cuts aren’t having a major impact on its aluminum exports.

Has Aluminum Found a Way to Live with Higher Chinese Exports?

In January, China exported 445,000 metric tons of unwrought aluminum—a 14.1% increase YoY (year-over-year). Exports also rose compared to the sequential month. China’s aluminum exports rose 4.5% YoY in 2017.

Capacity cuts

It’s worth noting that the winter month capacity cuts that started in mid-November will last until the middle of March. So, December and January were the two months when the capacity cuts were in place for the entire month. China’s aluminum exports rose 12.8% and 14.1% YoY in December and January, respectively.

Higher Chinese aluminum exports are a major challenge for aluminum producers (S32) (AWC) like Alcoa (AA), Century Aluminum (CENX), and Norsk Hydro (NHYDY). Higher Chinese aluminum exports haven’t had a material impact on aluminum prices in the past few months.

Higher Chinese aluminum exports are a risk for aluminum markets. The markets have found a way to live with Chinese aluminum exports—at least for now. Looking at individual stocks, a lot of negatives already seem to be part of Alcoa’s valuation. Read What’s Ahead for Alcoa after a Tough January? to learn about Alcoa’s short-term and long-term drivers.

Next, we’ll discuss China’s January copper imports.

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