China aluminium products exports soar to 74pc

BEIJING: China's exports of aluminium products jumped 74 per cent in 2006, partly replacing more heavily taxed primary metal exports in a trend that is likely to continue as domestic capacity expands.

Last year, China exported 1.24 million tonnes of aluminium products, such as billets and window frames, an increase of 74 per cent, customs data showed on Thursday. China's products imports rose 6 per cent to 686,124 tonnes.

"In 2007, there's no way exports will be lower. London prices are already pretty close to Shanghai, and the LME is rising while Shanghai isn't. A little more, and we'll see aluminium flowing out," said a Shanghai-based analyst.

Meanwhile, primary aluminium exports dropped by 26 per cent, to 838,286 tonnes in 2006, as tax changes curtailed shipments.

Primary aluminium imports also fell, by 32 per cent, to 289,855 tonnes.

Apparent primary aluminium consumption calculated by Reuters using import and export data, domestic production and stock changes on the Shanghai Futures Exchange, rose 24.2 per cent.

At the same time, China's economy grew at 10.7 per cent in 2006, its fastest pace in eleven years, while industrial output rose 16.6 per cent.

Improved profits are motivating smelters to restart capacity and further growth in China's primary aluminium output and products exports is expected in 2007.

The shift to exporting products has been motivated by tax changes that made it less attractive to export primary aluminium, as the central government sought to discourage smelters from expanding.

China's planners are trying to limit energy and resource use by polluting industries, including aluminium smelting.

Nonetheless, China's primary aluminium output rose 20 per cent in 2006, to 9.12 million tonnes

China's aluminium smelting capacity is estimated at 11.5 million tonnes at the end of 2006, analysts told Reuters, up from official estimates of 10.3 million tonnes at the end of 2005.

Some analysts estimate capacity could increase by another 3 million to 3.5 million tonnes in 2007, as smelters, including Huomei-Hongjun or HMHJ Aluminium and Electricity Co, add capacity.

China's top economic planner, the National Development and Reform Commission, said earlier in January expected smelting capacity to exceed demand by 1 million tonnes in 2007.

Smelters' margins improved in the second half of 2006, thanks in part to cheap alumina prices, which have halved since early 2006 as China's alumina output rose 54 per cent to 13.24 million tonnes.

Plenty of domestic alumina reduced the need for imports, which fell 1.5 per cent to 6.9 million tonnes in 2006. December alumina imports fell 5.6 per cent to 544,623 tonnes.