Why Did China’s Aluminum Exports Rise in May?

　　In the previous part, we discussed that China’s steel exports have risen on a monthly basis for four consecutive months. In this part, we’ll look at China’s aluminum exports data in May.

　　China exported 485,000 metric tons of unwrought aluminum in May—compared to 460,000 metric tons in May 2017. The 5.4% yearly rise in China’s May aluminum exports isn’t extreme. However, we’ll discuss the data in more detail.

　　Analysis

　　First, the modest yearly gain is coming from a relatively high base. In May 2017, China’s aluminum exports rose to the second-highest level on record at that time. May is the sixth consecutive month that China’s aluminum exports have risen on a yearly basis. On a year-to-date basis, China’s aluminum exports have risen 12.8% in the first five months of the year. The growth in China’s aluminum exports outstrips the expected growth in global aluminum demand.

　　Aluminum overproduction

　　During the first-quarter earnings call, Alcoa (AA) said that it expects the global aluminum demand growth to rise 4.25%–5.25% YoY (year-over-year) in 2018. The company expects the aluminum demand in world ex-China to rise 3.25–3.75% YoY in 2018.

　　The concerning part about China’s May aluminum exports is that in absolute terms, the exports are the at the second-highest level on record. Significant overproduction amid moderate demand growth has been fueling China’s aluminum exports this year.

　　Higher Chinese aluminum exports put pressure on aluminum prices. Aluminum producers’ earnings like Norsk Hydro (NHYDY) and Rio Tinto (RIO) are sensitive to aluminum prices. Meanwhile, we’ve started to see smelter restarts in the United States by companies like Century Aluminum (CENX) after President Trump’s tariffs lifted US Midwest aluminum premiums.