China¡¯s exports of aluminium, steel soar

China¡¯s exports of steel and aluminium nearly doubled in the first half of this year even while the central government mounted a nationwide campaign to cut sales overseas of such energy-intensive products.

The continued strength of the two industries in the face of measures designed to cut their export growth underlines the challenges of the government in resetting the direction of the economy.

Aluminium, steel and cement have been targeted because of the high use of energy in their production, and in the case of smaller and older mills and smelters, high levels of pollution.

Besides the potential for trade friction from rising steel exports in particular, the government is under pressure to increase energy efficiency and reduce greenhouse gas emissions.

Chinese officials on Thursday defended the impact of measures introduced this year to bring the steel and aluminium sectors under control, consisting mainly of taxing such exports at the customs gate.

In the seven months to July, China exported 45m tonnes of steel, up from 25m over the same period last year. Aluminium product exports rose by 88 per cent to 1.18m tonnes in the first half of 2007, according to Macquarie Research.

Local industry executives say they expect the surge in exports to be temporary, because of the long-term resource constraints in China.

¡°For China as a whole to turn from a net exporter of aluminium to a net importer is entirely possible. It¡¯s only a matter of time,¡± Xiao Yaqing, chairman of the Aluminum Corp of China, the country¡¯s largest producer, told Bloomberg on Thursday.

Thanks to effective subsidies from local authorities, most aluminium smelters pay Rmb300-400 ($39.50-$53.60, €29.20-€38.90, £19.80-£26.40) a megawatt hour for power, about half of the amount the government says they should pay.

Power accounts for about two-thirds of the cost of making aluminium.

China can also build new smelters for about half of the cost of foreign competitors, because of cheap land and labour, much of it made available by local governments chasing investment.

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