China's primary aluminium exports plunge

As foreshadowed by the early snapshot, the full Chinese trade report for October showed a plunge in exports of primary aluminium.

The indications are we are starting to see a fundamental shift in the country's aluminium trade patterns with exports of primary ingot sliding away and being replaced with rising exports of alloy and semi-processed product.

That would mark a significant degree of success on the part of the country's government, which has waged a long campaign against exports of primary ingot—a waste of the country's much-needed energy supplies, as Beijing views it.

The latest measure announced by the authorities has been a sharp hike in the export tax on ingot to 15% from 5%, effective Nov 1. That may still produce a one-off surge in November, depending on how ingenious exporters have been in moving metal through customs before the wire comes down, but beyond that most local and overseas commentators are looking for a steady deceleration in exports.

Primary exports were 47,750t in October, which was the lowest monthly figure since we started monitoring Chinese trade figures at the start of 2003. The impact on the rate of net export was slightly mitigated by an equally sharp decline in imports to 12,750t-also the lowest level we've seen over the same time-frame.

That said, net exports of 35,000t were the lowest of 2006 to date and down 28% on the year-earlier level.

As the country's trade in primary metal starts to dry up, there is evidence it is shifting into alloy and semi-manufactured products.

Exports of alloy rocketed to 313,600t in Jan-Oct from 129,000t in the same 10 months of 2005, even while imports have risen by a far gentler 10% to 184,900t.

Exports of products have shown equally remarkable growth of 70% year-on-year to 975,900t in Jan-Oct 2006 with smelters shifting focus in an attempt to get round the tax clamp-down on primary metal exports.

In broad-brush terms the overall impact on global supply-demand may prove to be neutral with the benefit of lower ingot exports offset by the depressing effect on Western metal demand from higher exports of semi-finished products.