COLUMN-Chinese exports mitigate aluminum supply chain disruption: Andy Home

By Andy Home

LONDON, July 29 (Reuters)China is playing a crucial role in rebalancing the global aluminum supply chain following Russia’s invasion of Ukraine.

The country has increased its alumina exports to Russia, making up for the loss of raw materials after Australia banned exports in response to what the Kremlin calls its “special military operation”.

China has also stepped up its aluminum exports this year, particularly to Europe, where smelters are grappling with soaring electricity prices stemming from reduced Russian gas flows.

The country’s exports of semi-finished products are also accelerating, though this is unlikely to be seen as a welcome development by the West, which has long accused China of dumping aluminum in this form.


Russian aluminum has not been targeted by Western sanctions, but the Russian giant Rusal faces a continuous interruption in its supply of raw materials.

Australia banned exports of bauxite ore and intermediate product alumina to Russia in March, freezing Rusal’s levies on joint venture Queensland Alumina.

The ban eliminates around 20% of Rusal’s alumina requirements for its Siberian smelters, the Australian government said at the time.

Rio Tinto RIO.AX took full control of the refinery, a move legally challenged by Rusal, further complicating any future resumption of alumina shipments.

China, meanwhile, is helping to fill the gap.

China’s alumina exports to Russia were negligible in 2020 and 2021, at 1,258 tonnes and 1,747 tonnes respectively.

Shipments over the past four months, however, soared to 471,000 tonnes, with June’s tally of 184,000 tonnes being the highest monthly tally yet.

The increase in volume to Russia was enough to swing China into a net exporter of alumina for the first time since 2018 and early 2019.

Then it was the Western market that ran out of raw material after a Brazilian court ordered the partial suspension of the Alunorte refinery, the largest production site in the world with an annual capacity of 6.3 million tonnes. .

Chinese exports then filled the resulting supply gap and are now doing so again for Russia.


The war in Ukraine has also caused a tectonic shift in China’s trade in raw primary aluminum.

Energy-hungry European aluminum smelters have slashed output as shrinking Russian gas supplies fuel a deepening energy crisis.

China increased exports in response, with outbound shipments rising to 177,000 tonnes in the first six months of 2022 from just 3,815 tonnes in the first half of last year.

First-half exports included 59,100 tons to the Netherlands, 32,900 tons to Turkey, 20,100 tons to Montenegro, 15,000 tons to the United States and 5,000 tons to Italy.

China, it should be recalled, has not exported much aluminum in unwrought form over the past decade due to a 15% export duty.

Such is the shortage of metal elsewhere and the physical premiums so attractive that the metal has begun to wash away this fiscal wall.

Equally important, however, is the metal that has been diverted from China, which has been a massive net importer of raw aluminum since the start of 2020.

Imports fell by 75% to 197,000 tonnes in January-June from 744,000 tonnes in the first half of 2021.

China was still a net importer in the first half of the year, but marginal at 20,500 tonnes, compared to 740,000 net tonnes at the same time last year.

The combination of China’s reduced reliance on the metal and its direct exports indicates a massive shift in trade patterns between East and West.

The pace of exports slowed noticeably in June itself and it remains to be seen how long this historically unusual phenomenon will last.

China’s aluminum production is increasing just as domestic demand is cooling, implying there is no shortage of units for potential future exports if the rest of the world needs additional material .


Even if China ships more raw aluminum in the coming months, most of any domestic surplus will be turned into semi-finished products.

These “seeds” are not subject to export duties, but instead benefit from a VAT refund, a tax structure that acts to channel aluminum into a value-added export route.

Semi-trailer exports jumped 18% to 5.5 million tonnes last year and have grown at an even faster rate of 28% so far this year.

Much of the rest of the world views China’s exports of semi-finished goods as state-subsidized dumping and has countered with multiple tariff barriers.

More are being erected as the flow of semiconductors from China to Western markets accelerates.

Earlier this month, the European Union said it would not extend a nine-month suspension of anti-dumping duties on Chinese flat-rolled products, which are now subject to duties ranging from 14% to 25%.

The US Department of Commerce has also just opened anti-circumvention investigations involving imports of aluminum foil produced in China but finished in Thailand and South Korea.

Such is China’s dominance in the global supply chain and its impact on exports to product markets everywhere else.

It is of course this same dominance that has seen the country engulfed in supply disruptions upstream of the alumina and raw metals segments of the processing chain.

Relief for commodity buyers from the West, but more pain for product makers.

The opinions expressed here are those of the author, columnist for Reuters.

China moves to net alumina exporter in Q2 as it ships to Russia

China’s aluminum trade has reversed as exports head to Europe

(Editing by Kirsten Donovan)

(([email protected], 44-207-542-4412 and on Twitter

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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