China’s aluminium product export increases as the world moves into deficit

The Western World moves into an aluminium deficit, as producers from all over the world are cutting back production. This has pushed up aluminium prices and brought many companies out of losses, like RUSAL.

The production of aluminium across the world, except China, this year was recorded at 24.38 million tonnes in July which was 1.5 million tonnes lesser than the record high production noted at 25.92 million tonnes in October 2011.

In the same period of nearly three years, the production of aluminium has grown by 5.7 million tonnes annualized to 23.28 million tonnes in July.

This extra production was not a result of better margins but pressures from the government who controlled the losses by tweaking the power rates. Even when the Chinese smelters were forced out of business, they would be quickly replaced by lower cost smelters.

However, China had always been more of an importer rather than an exporter, due to 15% taxes on primary aluminium export. However, they have been exported aluminium alloys for many years since they get a rebate on exporting finished products. Last year a recorded 357,000 tonnes was exported.

It has been long suspected however that what they ship as finished product is usually only thinly veiled version of the primary aluminium, just to avail the rebate and avoid the tax. Naturally, the products export has risen this year by 3.7% in the first half, but in July the figures jumped to 14% as compared to last year amounting to 320,000.

As the world’s move further into deficit, China could become the key source of aluminium. What stops them from going into full-fledged export of primary aluminium is a 15% export tax which the government is capable of striking off anytime.