SMM In-Depth Analysis On China August Primary Aluminum Imports And Short-Term Forecast

SMM, September 23: Primary Aluminum Imports: According to data from the General Administration of Customs, China's primary aluminum imports in August 2024 were approximately 163,000 mt, up 25.7% MoM and 6.5% YoY. From January to August, the cumulative import volume of primary aluminum was about 1.512 million mt, up 100.2% YoY.
Primary Aluminum Exports: According to data from the General Administration of Customs, China's primary aluminum exports in August 2024 were approximately 14,900 mt, down 21.3% MoM and 41.5% YoY. From January to August, the cumulative export volume of primary aluminum was about 62,000 mt, down approximately 41.3% YoY.
Net Imports of Primary Aluminum: In August 2024, China's net imports of primary aluminum were approximately 148,000 mt, up 33.7% MoM and 16.1% YoY. From January to August, the cumulative net import volume of primary aluminum was about 1.45 million mt, up 123.3% YoY. (The above import and export data are based on HS codes 76011090, 76011010)
In late July, aluminum prices in both domestic and overseas markets fell simultaneously, but the decline in the overseas market was more significant. This narrowed the loss on primary aluminum imports in China, providing an opportunity for arbitrage between domestic and overseas markets. As a result, primary aluminum imports in August increased by 33,000 mt MoM. The additional imports mainly came from the Russian Federation, India, and Indonesia.
Import Analysis: From the perspective of import source countries: In August 2024, the main sources of China's primary aluminum imports were still the Russian Federation, China, Indonesia, India, and other countries and regions. Among them, the total amount of primary aluminum imported from Russia was about 67,900 mt, up 24.5% MoM, accounting for 41.6% of China's total imports. From January to August, the total amount of primary aluminum imported from Russia was about 740,000 mt, up 13.3% YoY.
Additionally, in 2024, the amount of primary aluminum imported from China has been increasing month by month. This is mainly because China exports alumina to Russia, where it is processed into aluminum ingots and then re-imported into the Chinese market. In terms of the origin of aluminum ingots, Russian aluminum ingots still dominate. In August, the total amount imported in this manner was about 49,400 mt, accounting for 30.3%. From January to August, the total amount imported in this manner was 232,000 mt, accounting for 15.3% of China's total primary aluminum imports. This processing method can reduce export tariffs when exporting from Russia to China.
In August, the total amount of primary aluminum imported from Indonesia was about 19,100 mt, accounting for 11.7%, up 62% MoM. From January to August, the total amount of primary aluminum imported from Indonesia was about 139,000 mt, accounting for 9.2% of the total imports. The increase in primary aluminum imports from India in August was significant, up 396.2% MoM to 10,900 mt. From January to August, the total amount of primary aluminum imported from India was about 150,000 mt, accounting for about 10% of the total imports. Unlike the import methods of Russian and Indonesian aluminum, Indian aluminum is mostly imported under special customs supervision. Traders judge the trend of the price spread between domestic and overseas markets and bring the goods into China's bonded areas. If the import window opens, they can quickly enter the Chinese market to achieve certain profits. Otherwise, they will choose to shift to other high-profit countries.
SMM Comments: From late July to early August, the narrowing of the loss on primary aluminum imports in China provided some opportunities for arbitrage of overseas primary aluminum. The increase in net imports of primary aluminum in China was also within expectations. Since late August, the price spread between domestic and overseas markets has widened again, and the loss on primary aluminum imports has expanded once more. Especially since September, the US Fed's interest rate cut has stimulated a rapid rise in LME aluminum prices, with the increase far exceeding that in the domestic market. There is no arbitrage opportunity for primary aluminum imports, and overseas aluminum is mainly shipped under long-term orders. It is expected that China's net imports of primary aluminum in September may show a MoM decline. Additionally, a sudden fire at Press Metal in Malaysia in September led to the shutdown of 100,000 mt of annualized aluminum capacity, which will also tighten the supply of overseas aluminum spot to some extent. As the fourth quarter approaches, the offer prices for premiums at Japanese ports remain high, and it is expected that the MJP quotes in Q4 will remain in the range of $170-180/mt. Recently, market feedback indicates that spot premiums for primary aluminum in the US have risen rapidly, with the latest transaction premiums reaching $418/mt, up $22/mt from early September. The high spot premiums for overseas primary aluminum are stimulating more aluminum to flow to high-premium regions such as Southeast Asia, reducing the likelihood of shipments to the Chinese market. Considering the above factors, SMM expects that in September and even in Q4, China's primary aluminum imports will mainly be under long-term orders, with monthly net import volumes around 110,000-130,000 mt.