Question with no answer

I am at the China Aluminium Conference in Qing Dao. The conference proper doesn’t start until tomorrow, but already several familiar faces are around the hotel lobby.

The question that everybody is asking is, what will happen next in China? Will China cut capacity, or cut the 15% export tariff? It’s a question for which nobody has an answer.

Metal prices are at rock bottom. Chalco has just secured a subsidy to keep its Liancheng smelter open, locking the over-supply problem in a little more.

That’s the question at the heart of so many other issues. China has just recorded a huge jump in bauxite imports. Alumina prices are slipping. The new law banning unqualified petcoke is just around the corner. China’s macro economic conditions are no better, and now we have yet another interest rate cut and lower RRR. Overseas, LME prices are falling, though not as dramatically as in China. China’s exports of metal keep on coming. It doesn’t matter from which angle you look at the problem, the question remains the same, and remains unanswered.

China ruled against cutting the export tariff last year. Will the authorities change their minds? One part of the conundrum that is clear - what happens outside China is of little concern to the Chinese. Little do they realise that cutting the tariff won’t lead to better margins, because the LME will drop as Chinese raw metal enters the international market.

i also heard this morning that the American Aluminum Association has started WTO proceedings against Zhongwang, though I haven’t seen any other information about this.

I will bring more updates and opinions from the hotel lobby as I can. Perhaps there’s an answer to the question here somewhere.

By the way, don’t look for me on the list of conference attendees - I am not registered. But if you see me in the hotel lobby, come and say hello.