China’s aluminium exports fall again in July, was production cut back?

One of the causes of falling aluminium prices over the past few years was the rise in China’s aluminium exports. But Chinese exports started to calm down this year, helping aluminium prices to recover.

China exported 390,000 metric tons of unwrought aluminium in July, down 9.3 per cent from July of last year. Chinese aluminium exports have fallen around 7 per cent for the first seven months of 2016. Lower Chinese aluminium exports suggest stronger aluminium demand in China coupled with some supply cuts.

According to the latest figures released by the International Aluminium Institute (IAI), Chinese aluminium production has now fallen on a year-over-year basis in five out of the last six months. For the first half, Chinese aluminium production has fallen by 3.3 per cent compared to the same period last year. This will be the first year where Chinese annual aluminium output declines if Chinese smelters don’t restart idled capacity. But, will they?

US Producers Warning Of Higher Chinese Supply in H2

During their second quarter earnings calls, some U.S. producers pointed to higher Chinese supply as one of the biggest risk for the aluminium industry in the second half. Century Aluminium believes that aluminium production in China could increase in the high single digits in 2016. For that to happen, we would need to see a sharp increase in China’s aluminium output in the coming months. Norsk Hydro also expects some of the Chinese capacity to come back later this year.

Prices: Not Too High But Rising Steadily

    Three-month aluminium LME price rising this year

     Source: MetalMiner analysis of Fastmarkets data

The ongoing fall in Chinese exports and a good-looking demand picture thanks to Chinese government stimulus are supporting aluminium prices this year. Unlike other metals, aluminium prices haven’t really skyrocketed but they are drawing a nice uptrend this year, signaling that investors’ sentiment on the metal is improving. If China doesn’t restart capacity, we could continue to see prices climbing higher.