US Detains Aluminium Imports from China's Xinjiang, What is its Impact on Domestic Aluminium Product Exports?

SHANGHAI, Feb 3 (SMM) - The US has started to detain imports of aluminium products suspected of being made through forced labour from China's Xinjiang region, A.P. Moller-Maersk, one of the top shippers in the world told the media. All importing companies are required to investigate their supply chains and implement compliance programs.

The US Customs began issuing detention notices on aluminium product from China since late December last year or early this January, according to law firm Miller & Chevalier. The action will most likely target aluminium used in automotive parts. 

It is worth noting that detention of aluminium came after that of cotton, polysilicon and tomatoes. These actions are taken under the so-called "Uyghur Forced Labour Prevention Act" signed by the US President Biden at the end of 2021, which requires that companies must provide evidence to prove that the imported goods from or produced in Xinjiang do not involve the so-called forced labour.

According to SMM data, the installed aluminium capacity in Xinjiang currently amounts to 6.18 million mt, accounting for 13.7% of its total in China. The aluminium output in Xinjiang ranks second in China in 2022 at 6.12 million mt, taking up 15.3% of the total output. The proportion of aluminium liquid in local smelters' total output is about 47% on average, and the major products include aluminium ingots, billets, rod and wire/cable. The destination of these products is central and east China. Moreover, Xinjiang has 120,000 mt of high-purity aluminium capacity, 52% of the total in China. At present, China's aluminium semis and products produced with Xinjiang's aluminium are sold both at home and abroad.  

In terms of aluminium semis, China's aluminium semis exports set a new record in 2022. However, the exports to the United States kept falling due to the anti-dumping and anti-subsidy sanctions imposed by the US government. To be specific, China's exports of aluminium semis to the US decline from 702,000 mt in 2017 to 387,000 mt in 2022, once hitting 247,000 mt the lowest level in 2020. The proportion of aluminium semis exports to the US to the total exports also dropped from 16.5% in 2017 to 6.3% in 2022.

Among them, 14,900 mt of aluminium extrusions was exported to the United States in 2022, accounting for 1.6% of the total export volume, down sharply from 68% in 2019. It is because that the United States has imposed anti-dumping and countervailing measures targeting at China's aluminium extrusion since 2011. Therefore, even if the US detentions are enforced to restrict exports of aluminium products from China in the name of forced labour, its impact on China's aluminium extrusion landscape will be relatively limited.

In terms of aluminium sheet/strip and foil exports, they accounted for 81% of the total export of aluminium semis in 2022. Exports of these two products to the US also fell from 35% and 63% in 2017 to 6.73 % and 4.99% respectively in 2022 relative to the total exports.。

In conclusion, the data show that China's exports of aluminium semis to the US only account for a limited portion of its total, and all of these products are not using raw materials produced in Xinjiang. Therefore, SMM believes that US’s move will barely affect China's exports as a whole, except that several enterprises may be impacted.

At present, the spot premiums of aluminium ingots in the United States are increasing. If the unreasonable trade policy extends, the aluminium prices in the US may climb, and the cost of exporting aluminium semis to the United States will be lifted.