Iran steps up aluminium shipment to China

Iran increased its primary aluminium shipment volumes to the world’s top consumer China after global premiums for the white metal along with the prices declined sharply hitting demand from its long time buyers Turkey and Middle East.

Iran left behind Russia and other exporting nations in the race to become China’s top overseas supplier of primary aluminium in August. As per China trade data, Iran shipped 13,925 tonnes of primary aluminium last month becoming the largest seller of the metal to China in the first eight months period of 2015.

The escalation in shipment volume is quite unusual given the fact the Chinese market is flooded with excess primary aluminium which the country is selling out to the global markets in the form of disguised aluminium products leading to a mammoth surplus and unprecedented price fall.

According to the traders, Chinese aluminium companies had been feeding the Iranian smelters with raw materials for primary aluminium production- alumina and bauxite because production costs there are low and they could then sell the metal back to the region. Iranian brands of aluminium attract lower premiums than other global brands because of trade sanctions that restrict purchasing and payment.

"You cannot take anything out of Iran if it is in USD, AUD or the euro, but you can do it in yuan, rupee, Indonesian rupiah. As long as that payment method is in place you can get cargo out (and) pay them," said a trader in Singapore.

"A lot of this aluminium used to flow in to Turkey and India and other companies in the Middle East. They tried to sell it but they didn't really get the premiums that they wanted," said a second trader based in Singapore.

"The companies that are owed the aluminium don't want to keep it in Iran because of credit risks. Since they couldn't ship it out to these other places, they have shipped it back to China," the second trader added.