Chinese Aluminum Exports More Than Imports for Second Month on Production

China, the world’s largest maker and user of aluminum, exported more of the metal than it imported for a second month in July as a surge in production added to an oversupply in the country.

Inbound shipments were 3,518 metric tons last month, the Beijing-based customs office said today, the lowest level since June 2008. That’s 70 percent less than in June and 97 percent less than a year earlier, according to Bloomberg calculations.

China became a net exporter of the metal in April for the first time since the end of 2008. Exports were 15,925 tons in July, partly driven by strong overseas demand as financing agreements tied up inventories in the U.S. and Europe.

“There’s too much aluminum in China at the moment, which is also reflected in weak domestic prices,” said China International Futures (Shanghai) Co. analyst Fang Junfeng. November-delivery aluminum on the Shanghai Futures Exchange was at 15,330 yuan ($2,255) a ton today, down 12 percent this year.

In China, inventories of the metal in warehouses monitored by the exchange have jumped 65 percent this year as domestic smelters ramped up production on expectations that demand will improve as the global economy recovers. China’s production of primary aluminum gained to a record 1.42 million tons in June.

“There seems to be a supply squeeze outside China, which encouraged Chinese exports,” said Jia Zheng, a trader at Soochow Futures Co. “We hear that aluminum premiums have been high in Europe and the U.S. in the past few months even though visible stockpiles are large.”

Financing Accords

Aluminum for three-month delivery on the London Metal Exchange traded at $2,058 a ton at 5:45 p.m. in Singapore, a 7.8 percent loss this year. The discount for cash metal to the three-month contract narrowed to $1.75 on Aug. 18, a level not seen since March 2007, indicating supplies may be tight in the short term.

An estimated 60 percent to 65 percent of London Metal Exchange aluminum inventories are tied into financing accords, according to Deutsche Bank AG. Premiums paid over the LME cash price rose to a five-year high in North America and jumped to the highest in at least a decade in Europe this year, according to researcher CRU, even as LME stockpiles expanded to more than three times the average level over the previous 10 years.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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