RPT-COLUMN-China aluminium surplus to eat away global deficit – by Clyde Russell (Reuters U.S. – April 16, 2015)


LAUNCESTON, Australia, April 16 (Reuters) – China’s exports of aluminium products have continued to surge, a trend that if continued may push the rest of the world toward a surplus.

China’s exports of primary, alloy and semi-finished aluminium grew by around 43 percent in the first quarter over the same period last year, according to preliminary customs data released on Monday.

While the initial data release doesn’t provide the detailed breakdown, figures for January and February show that the overwhelming share is semi-finished products, such as bars, rods, wire, plates, sheet and foil.

In the first two months of the year, exports in this category, commonly known as semis, surged 91 percent to 770,000 tonnes, a trend that will almost certainly be continued when the detailed March figures are released later this month. Exports of semis have surged because they get a 13 percent value-added tax rebate, that largely offsets the 15 percent export tax on aluminium.

The tax rebate doesn’t apply to exports of primary aluminium, but it’s a common view in the market that much of China’s exports of semis is melted down and re-fabricated by importers.

These semis are attractive to aluminium consumers outside China, as they are competitively priced against supplies sourced through the London Metal Exchange system, especially once the delivery premium is taken into account.

The benchmark three-month LME contract has lost 2.2 percent so far this year, closing on Wednesday at $1,812 a tonne.

The equivalent contract on the Shanghai Futures Exchange closed at 13,060 yuan ($2,109) a tonne on Wednesday, virtually unchanged from the start of the year.

The gap between the two benchmarks is now just under $300 a tonne, which is roughly the same amount as the premium charged for delivery over LME prices.

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