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After the U.S. sanctioned the aluminum giant-RUSAL,Can China fill the aluminum supply gap

  • Author:Dong Xing
  • Release on:2018-04-16
After sanctions against the aluminum giant RUSAL in the United States, China, the big aluminum producer, may be able to help fill the global supply gap.

However, industry experts said that tariff disputes will prevent China Aluminum from entering the United States, so aluminum users also need to look for other countermeasures.

Since the United States announced new sanctions, international aluminum prices have risen by more than 10%. China's aluminum production(Aluminum coating sheet 5052) faces a series of tariffs and other taxes, and aluminum prices need to rise further to attract Chinese exports.

“China is the only place where there is surplus material, so we need to motivate it to send excess supplies to the United States,” said Robin Bhar, director of financial research at Societe Generale in London.

Rusal accounts for about 14% of the world's aluminum output except China. The flow of the global aluminum market has changed due to the United States imposed tariffs on steel and aluminum products, and further adjustments are needed to meet local needs.
Traders said that aluminum, such as Canada and Australia, which received tariff exemptions, has already flowed into the US market where premiums have soared. Aluminum in India and the Middle East has also found a place to go.

Some analysts and traders expect that UCLA products will flow to China and other Asian regions, while China will export its own aluminum products(1235 aluminum foil in china) to fill the supply gap in the United States and other regions.

But this will depend on RUSAL accepting a substantial price cut of about 25% due to lower domestic prices in China, as well as factors such as logistics and tariffs.

"If RUSAL can tolerate price cuts, we expect its products to flow to China. Further, China will increase semi-finished aluminum products and even primary aluminium exports to ease supply shortages in other parts of the world," said ING analyst Oliver Nugent said.

Others are suspicious of the large amount of Chinese metals exported to the United States.

Wen Jun, vice president of the China Nonferrous Metals Industry Association, said that part of Russia's aluminum may be exported to China at the end of the year, but he did not want to suggest that sanctions may provide new opportunities for China to export aluminum to the United States.

He believes that the tariffs for Chinese aluminum products(Aluminum coating coil on sale) entering the United States are very high and the product structure is also different. He pointed out that the United States imposes double taxation on anti-dumping and countervailing duties on China's major aluminum products.

Bhar said that the premium on U.S. exports must be at least 25% to attract Chinese exports.

Traders believe that RUSAL can also choose to export to Turkey, which is a large consumer of aluminum, while some of the company's metals may be re-melted after the final conversion of exports.