January Aluminum Imports and Exports

China Customs published the January aluminum imports and exports figure. The primary exports dropped 96.43% YoY. Both Semi and scrap exports increased in January. Semi export was up by 5.3% YoY with 350Kt and scrap surged 228.22% YoY in January.

The primary import dropped compared to the last December, but it still remained high with 27,051 tons which was an increase of 314% YoY. It was mostly driven by the spread between Changjiang and LME in January. January Changjiang price was slightly higher than LME cash price and it created some profits opportunity for primary imports.

January aluminum average price was high with a RMB13051/ton. Although most aluminum processing factories closed during the holidays, the ingot demand did not drop sharply. Bad weather and snow also contributed to low inventory levels, and we think the low inventory and high metal price was the major reason for low primary exports.

The aluminum surplus problem exists in the downstream, not primary. The high domestic ingot demand means the metal flew into downstream processing factories. With the low season for the real estate industry in January, the demand for metal was weak in January. When we passed the Chinese New Year holidays and entered February,  the excess supply issue appeared in the aluminum bar industry. The low demand and high supply for semis caused the increasing semi exports in January.

January was the month with Chinese New Year holidays. Many downstream processing aluminum factories started their holidays in the middle of January. Plus the strong impact from the environmental control, many aluminum processing factories operating rate dropped in January. Based on our information, Guangdong aluminum processing factories reopened late this year due to the high aluminum price and environmental control even in February. It caused the domestic demand for scrap to decline. The scrap production increased by the speed of 10% growth before 2017. When the scrap demand declined, the large volume of metal has to find its way to gain profits and it is not surprising to see the scrap exports hiked in January. Since aluminum industry will have its golden season in March, we expect to see the scrap domestic demand will increase.

From the historical data, we saw the aluminum exports will hike in March. The situation is complicated this year by the influence of uncertain trade policy from Donald Trump, the volatile RMB currency and the environmental inspections in China. Despite all this uncertainty,, we expect to see the aluminum exports will have a big rise in March.