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China’s push drags aluminium prices

Chinese smelted metal is flooding global markets, some of it landing on Indian shores, and depressing international and domestic prices.

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Its smelted metal is flooding global markets including India

The ferrous dynamics is being replayed in the aluminium domain. Even as China works to dis-incentivise exports of aluminium, as it has for steel, Chinese smelted metal is flooding global markets, some of it landing on Indian shores, and depressing international prices and domestic prices.
 
Total aluminium imported into India in 2006-07 is estimated at 1.1 lakh tonne or about 11% of total domestic consumption of 9.93 lakh tonne. Aluminium imports was up 15% during the year and of the 1.1 lakh tonne, it is estimated that 50,000 to 60,000 tonnes were of Chinese origin though most of it were  routed through Singapore trading houses.

The surge in Chinese exports, leaving its domestic market in shortage, along with high stocks at warehouses of the London Metal Exchange (LME)   have been main cause of depressed metal prices.

Current LME aluminium average price for June at $2794 per tonne is down $100 from the average price of the metal during January-May.

In response to this international market conditions,  National Aluminium Company Limited (Nalco) this month slashed domestic prices of primary metal by Rs 4,000 per tonne to Rs 1,19,500 per tonne, while Hindalco Industries cut prices by Rs 3,000 per tonne to Rs 1,20,500 per tonne.

Senior officials in Nalco said rising imports of metal had not affected the off-take of domestic metal and “Nalco metal was flying off the shelves”.

However, this dynamic could change very quickly if Chinese efforts to rein in exports did not have the desired impact, as in case of steel and quantum of Chinese metal available in domestic market surged beyond 1 to 1.2 lakh tonne per annum.

According to reports trickling in from Shanghai-based trading houses, the Chinese government will reduce export tax rebate that range between 8%-15% and 0% to 13%.
China has already implemented a similar scheme to reduce export incentive for steel in order to rein surging steel exports that had triggered calls for trade retaliation from its trading partners like US and EU.

China exported 1,96,710 tonne of  aluminium in April, up 28% over previous month. Total exports in the first four months of current calendar surged 95% over corresponding period of 2006 at 6,05,522 tonnes. 

The flooding of Chinese aluminium in international markets has had a nominal impact on Nalco, the country’s sole exporter of primary metal. The company’s exports in May at 5,694 tonnes was down from 6,081 tonnes in January, 6402 tonne in February and 6442 tonne in March 2007.

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