In the second half of last year, the export of several basic metals in China increased significantly due to the metal financing scandal in Qingdao Port. The final impact is that metals that are collateral flow from China's bonded warehouses to the London Metal Exchange's (LME) safer warehousing system. As 2014 draws to a close, this forced destocking shows signs of weakening, and exports of metals such as zinc and nickel should fade this year. The export of aluminum semi-finished products is structural in nature, reflecting a significant increase in China's own smelting capacity.
China's demand for aluminum continues to grow, and its pace is faster than any other region. The problem is that China's own production has been growing rapidly, and in the face of weak prices, there is no clear supply planning.
Exports of manufactured goods are a buffer for overcapacity in China, but they are an alarm for overseas markets. Last year's aluminum exports increased by nearly 20% to 3.67 million tons, and in December it hit a peak monthly record of 492,000 tons. The performance in December may be a special case, reflecting market concerns that have yet to be confirmed, that is, the market is concerned that the Chinese government may be prepared to adjust the preferential tariff rules for exported processed products rather than to primary metals.
According to preliminary data released on Monday, China's aluminum exports fell to 379,000 tons in January, and the number in February was basically the same. However, according to past standards, the export volume in these two months is still very high, and the overall trend is still steadily rising.
In addition, the trade volume of aluminum products in China far exceeds that of primary aluminum. China's aluminum exports are flooding the Asian market, which is also a reason for the weakening of the local physical premium market. If the current trend continues, both the premium and the spot price are bad, as China's supply fills the gap caused by production cuts in other regions.