China's aluminium exports leading to unfair competition- observes Hydro

China’s aluminum exports that are compounding a glut of the metal are unfair competition to overseas producers, according to Norsk Hydro ASA.

China accounts for half of the world’s aluminum supply and has been producing record amounts of the metal, which it then ships out in the form of semi-fabricated products. A “significant amount” of primary material is also leaving the country disguised into shapes that circumvent the country’s tax rules, said Hydro’s Chief Executive Officer Svein Richard Brandtzaeg.

“This is definitely unfair competition,” Brandtzaeg said in an interview in London on Tuesday. “This is absolutely damaging the industry. It’s taking the market share from other companies.”

Aluminum is trading near a six-year low amid an oversupply that Hydro, Europe’s third-largest producer of the metal, estimates at as much as 1 million metric tons this year. Economic growth in China, also the biggest aluminum user, is poised to expand at the slowest pace in a quarter century.

While the nation requires a 15 percent export duty on primary aluminum, it offers a 13 percent tax rebate on shipments of semi-fabricated products. To avoid a tax on raw materials, some companies are turning the primary blocks into a semi-finished product, shipping them out and re-melting it back to blocks which then can be sold at a premium, according to AZ China Ltd., a Beijing-based consultancy.

That’s harming producers elsewhere as China sells the metal below the cost of production, Brandtzaeg said.

Chinese exports of unwrought aluminum and products swelled 35 percent in the first half from a year earlier to 2.5 million tons, according to customs data. While demand in the rest of the world will exceed supply this year, a glut in China will mean a global surplus of 500,000 to 1 million tons, according to Hydro.