Surged Primary Import in November

China’s November import volume is 41,877 tons. It is 31,265 tons more than the October import volume. Compared to the same period last year, the November primary import volume was up by 258% YoY.

China’s November aluminum price performed very strongly. It was boosted by speculative funds to the year’s high record of RMB15380 on 14^th of November. In the meantime, the LME price also increased by the driven of the high price in China. The Chinese aluminum price was so high that even when we add the relevant tax and import cost, the traders could still gain profits if they import the ingots. The spread between Changjiang and LME was widened to 296 in November. On 8^th of November, Changjiang price was RMB812 higher than the LME cash.

Since the arbitrage window was opened, we started seeing the imported ingots in the market. Based on China Custom’s record, the imported ingots were mainly from Australia, Malaysia and Saudi Arabia in November.

We also noticed the imported ingots were mainly purchased by the big traders, not the final consumers. The big traders organized the imported ingots to be sold in Shanghai Free Trade Zone. Based on our information, the imported ingots from Glencore was over 10,000 tons in November.

Because of the long shipping time, it will be too risky for final consumers to buy the ingots from overseas. It will take at least one week for China to import ingots from its nearest supplier Korea. It will take at least one month for China to by ingots from other countries. The price can very quickly change in that time.

When Chinese aluminum price started correcting itself in December, we started noticing the LME price still remains stable. The arbitrage window closed in December. The LME price was around RMB1956 higher than the Changjiang price on 20^th of December. Other than Guandong province which still have some overseas ingots from the pervious imports, other major market areas have no imported ingots in December.

We will not be surprised to see the China Custom primary import figure will have a big drop in December.

In the meantime, we noticed the continue dropping primary export and the increased semi exports. Plus the large imported primary ingots figure in November, it supported our point that the excess capacity is in downstream, not in primary.