China's primary aluminum imports in June decreased by 23.22% MoM. In July, domestic primary aluminum imports are expected to be mainly from long-term contracts

In June 2024, the domestic import volume of primary aluminum decreased by 23.22% MoM to 121,200 mt, up 35.61% YoY; the domestic export volume of primary aluminum in June was approximately 7,000 mt, down 78.68% YoY; the net import volume of primary aluminum in June 2024 was 114,200 mt, up 102.5% YoY, down 24.41% MoM.

From January to June 2024, the cumulative domestic import volume of primary aluminum was 1.219 million mt, up 151.1% YoY; the cumulative domestic export volume was 28,300 mt, down 50.91% YoY; the total net import volume of primary aluminum from January to June was 1.1907 million mt, up 178.28% YoY. (The above import and export data are based on customs codes 76011090, 76011010).

Overall, the import volume of primary aluminum in China continued to decline in June 2024, mainly due to the sustained import losses since mid-to-late April. The import loss of primary aluminum in June remained at a level of over 1,000 yuan/mt, and the import window has been closed for three months. The volume of primary aluminum in transit decreased, and the port arrivals of aluminum ingot were mainly from long-term domestic sources.

The main sources of primary aluminum imports to China in June 2024 were Russia, China, Indonesia, India, and Kazakhstan. Among them, the total import volume of primary aluminum from Russia was approximately 56,700 mt, accounting for 46.77% of the total imports, making Russia the main source of primary aluminum for China. Some primary aluminum from Russia was imported to China through export processing trade, where Chinese alumina was exported to Russia and then processed into aluminum ingots before being re-imported into the Chinese market. The total import volume through this method in June was about 26,000 mt, accounting for 21.48%.

Therefore, the total volume of Russian aluminum metal imported in June was approximately 82,700 mt, accounting for 68.25% of the total domestic imports. The total import volume of primary aluminum from Indonesia was about 10,600 mt, accounting for 8.74%; from India, it was about 9,700 mt, accounting for 8.08%; and from Kazakhstan, it was 7,500 mt, accounting for 6.22%.

From the perspective of trade methods, in June 2024, domestic primary aluminum imports mainly flowed in through general trade, accounting for 44.63%. This was followed by export processing trade, accounting for 21.49%. Primary aluminum flowing in through bonded supervision locations and customs special supervision areas accounted for a total of 30.38%, a decrease of 9.7 percentage points from May's 40.08%, mainly due to continued significant import losses, reduced arbitrage trade volume of aluminum ingots between domestic and foreign markets, and a similar reduction in primary aluminum in transit for arbitrage. The remaining 0.24% entered through feed processing trade, and 2.83% entered through processing trade with supplied materials.

Export Analysis: Due to the continued closure of the import window in June 2024, some imported sources were re-exported. From the perspective of trade methods, in June, domestic primary aluminum mainly flowed out through the logistics of customs special supervision areas, accounting for 99.52%. From the perspective of export destination countries, in June 2024, 58.08% of exported primary aluminum went to South Korea, 14.57% to Japan, and 12.77% to Nigeria.

SMM Brief Comment: The import window remained closed in June, with significant losses in imports persisting. The total domestic import volume of primary aluminum further decreased, resulting in limited impact on the spot aluminum ingot market due to the scarce supply of imported primary aluminum. However, as the operating capacity of domestic aluminum continued to rise and the off-season for demand approached, consumption has weakened, making destocking of aluminum ingots difficult. As of July 25, SMM statistics show that the total social inventory of aluminum ingots is at a three-year high for the same period, with ample circulating supply in the spot market. The spot market in major consumption areas has maintained spot discounts for a long time. In July, SHFE aluminum significantly weakened, and LME aluminum has also been weak, with a more pronounced decline compared to SHFE aluminum. The loss margin for primary aluminum imports narrowed. However, as of July 22, there is still a loss of about 800 yuan/mt for primary aluminum imports, and overseas aluminum ingot premiums remain high and volatile. It is expected that in July, domestic primary aluminum imports will mainly consist of long-term contract sources, with a net import volume of around 100,000-120,000 mt.