China’s Aluminium Market Shows Resilience Amidst Global Slump
China’s Aluminium Market Outperforms Global Trends
China’s aluminium market has defied global trends this year, with prices on the Shanghai Futures Exchange (SHFE) climbing over 1%. In contrast, the London Metal Exchange (LME) experienced an over 8% slump. The strength of China’s green sector amidst a slow economic recovery is largely credited for this divergence.
Increased Aluminium Imports into China
China’s outperformance of LME has created an open arbitrage window, leading to a significant increase in aluminium imports. Russia has emerged as a primary source of these imports, as Western buyers imposed self-sanctions following Russia’s invasion of Ukraine. Notably, China accounted for 87% of its total aluminium imports from Russia during the first eight months of 2023.
Domestic Production Reaches New Highs
Despite the surge in imports, domestic aluminium production in China has also reached new highs. This increase is primarily attributed to an improved hydropower supply in Yunnan province. However, potential disruptions from the forthcoming dry season could lead to a decrease in output and a surge in imports.
Robust Domestic Demand and Low Inventories
Low domestic aluminium inventories highlight the robust domestic demand for the metal, with SHFE stocks falling to their lowest since March 2019. Beijing’s decarbonisation efforts have significantly driven aluminium demand, particularly in renewable energy-related manufacturing. The rapid growth of China’s new energy vehicles (NEV) sector, which experienced a year-on-year increase of over 37% in the first eight months of this year, further emphasizes aluminium’s critical role in battery electric vehicles.
Expanding Green Sectors Counterbalance Traditional Weaknesses
The solar industry, another major consumer of aluminium, continues to grow despite challenges from the pressured construction sector. China’s leading position in solar photovoltaic (PV) capacity additions showcases the continued expansion of green sectors. This growth is expected to counterbalance weaknesses in traditional sectors and enhance the demand for green metals like aluminium.
This article was generated with the support of AI and reviewed by an editor.
