China to boost exports of semi-finished aluminium products

Chinese producers of semi-finished aluminium products are likely to boost exports in the second half of the year, taking advantage of strong international prices as small customers face tight credit at home, industry sources said. Strong Chinese exports of semi-finished products could be used to replace primary aluminium, traders said, weighing on record premiums for the metal. In China, mounting exports could boost demand of primary aluminium in the world's top consumer and producer of the metal.

"A lot of firms have been looking to export focusing on aluminium plates and strips," said a trading manager at a state-owned maker of primary aluminium and semi-finished products. He declined to be named as he was not authorised to talk to media. "Exports are likely to rise in the second half." Strong international prices and lukewarm demand from the building sector in China had encouraged exports, while semi-finished products also have a tax advantage over primary aluminium.

Tight credit conditions have also led small domestic buyers of semi-finished aluminium products to delay payments in recent months, said Shanghai-based information provider SMM, further encouraging exports. SMM expected exports of products such as plates, strips and profiles to increase in the second half of the year from the first six months. Exports of semi-finished products rose 3.7 percent in the first half from a year ago to 1.54 million tonnes.

Most semi-finished aluminium products enjoy a tax advantage as they are entitled to a 13 percent tax rebate from the Chinese government, compared with a 15 percent export tax for primary aluminium. Some exports of aluminium plates and strips have been remelted to make other products, replacing primary aluminium as premiums for primary metal have held at record highs in the international market, traders said.

Demand from South America and the Middle East has been strong, said a trader who works for an international trading firm. Traders said Chinese exporters this week asked for premiums of $250-$300 per tonne on a free-on-board basis over London Metal Exchange cash aluminium prices for spot plates and strips, made mostly from primary metal with a small portion of other metals such as magnesium and silicon.

Premiums for spot primary aluminium for delivery to South Korea had traded at about $390 a tonne over cash LME this week after Japanese buyers agreed to pay record term premiums of over $400 in the current quarter, marking the benchmark in Asia. Cash LME prices have risen about 10 percent since the end of June, at about $2,056 per tonne on Thursday. In China, prices for spot aluminium have risen 7 percent since the end of June, at about 14,240 yuan per tonne.

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