Surge in China’s aluminum exports seen causing little disruption in Asia

The recent rise in China’s aluminum exports has had a limited impact on the Asia market to date due to the moves that participants made to protect their businesses after a similar surge in 2015, market sources said Friday.

London Metal Exchange aluminum prices traded higher than Shanghai Futures levels in December, prompting Chinese plants to export aggressively over the past two months.

A similar situation emerged in the first half of 2015, which significantly impacted the Asia market.

This time, few market participants in Asia are feeling the direct impact of the increase Chinese exports, as they are able to compete more effectively, trade and producer sources said.

S&P Global Platts surveyed two producers and five trading firms this week on the impact of China’s increase in exports.

Two producers and two traders said they had not been impacted at all. These producers have annual contracts with customers in Vietnam, Thailand and the rest of Asia.

One trader said he had deliberately focused in the three years since China’s last export hike on developing business relationships with Asian consumers that have specific raw material requirements and had less flexibility in switching suppliers.

A second trader said he had also shifted his focus away from supplying buyers who could be tempted to switch to cheaper Chinese material. “Chinese exports will always have an impact, but that does not bother us,” the second trader added.

The CIF Vietnam premium has been stable above $100/mt CIF main ports since December, both sources said. One sale for Australian metal was reported done this week at $114.50/mt plus LME, CIF Vietnam.

However, three traders admitted there was some business they could not win in Vietnam, Thailand and South Korea over the past two months because of the availability of cheaper Chinese coil and other aluminum products.

“The Asia market will stay the weakest market; there is a lot of stock,” the third trader said.

China’s exports of unwrought aluminum and aluminum products in December rose 12.8% year on year to 440,000 mt and was up 15.8% from November, latest preliminary data from the General Administration of Customs showed. For full-year 2017, exports totaled 4.79 million mt, up 4.5% year on year.