China’s aluminum import surge

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    LONDON- China imported more aluminum than it exported in July.

    This is a very rare phenomenon. China, after all, is the world’s largest producer of the light metal, accounting for 57 percent of global output in the same month, according to the International Aluminum Institute.

    It is normally a huge exporter of semi-manufactured products (semis) – around 5.2 million tons in both 2018 and 2019 – with no need to call on extra supply from the international market.

    The last time China turned net importer was in 2009.

    Now, as then, the inversion in trade flows speaks to the disconnect between a Chinese market that is in full recovery mode and the rest of the world that is struggling to get back on its feet.

    Most expect this import surge to be short-lived, as it was in 2009, but the world has changed since then and it’s possible we’re also seeing underlying structural shifts in the aluminum market.

    China imported 123,000 tons of primary aluminum in June and another 185,000 tons in July. The two-month count already exceeds every yearly total since 2013 and most analysts think there is more to come.

    What’s sucking this metal into China is an open arbitrage window between elevated Shanghai Futures Exchange (ShFE) prices and a lagging London Metal Exchange (LME).

    The cash arbitrage between the two contracts flexed out to a seven-year high above 2,000 yuan per ton at one stage in July.