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China metal: Aluminium imports, price seen rising

HONG KONG: China was likely to increase aluminium metal imports this year amid shrinking smelter capacity, steady demand and rising domestic prices, traders said on Tuesday.

High prices and tight supply of alumina worldwide were forcing some Chinese smelters to reduce smelting capacity or shut down, traders said.

Alumina was quoted at $400 to $420 a tonne C&F China compared with about $200 last August.

Aluminium smelter capacity in China was likely to shrink by 15 to 20 percent this year. In addition, the rising domestic price for aluminium was likely to mean increased aluminium imports, a trader said.

"There still are a lot of expansion projects, like building the power distribution network, and China is looking to export more aluminium end products after tolling," he said.

Aluminium imports should total 600,000 tonnes this year compared with about 400,000 tonnes in 1999, the trader said.

Chinese customs has lowered the alumina import duty to six percent from 18 percent, traders said.

China has brought forward a 400,000-tonne quota for alumina for the first two months of 2000 from the 1.2 million tonne quota for the March 2000/February 2001 year, according to broker Macquarie Equities Ltd in London.

The high international prices for aluminium and alumina were also stimulating sales by China.

Three months aluminium was quoted at $1,697 a tonne on Tuesday after climbing to 29-month highs on Monday on the London Metal Exchange.

In China the spot aluminium price was 16,000 yuan a tonne ($1,928) and was likely to climb past 17,000 yuan this year, traders said.

Chinese smelters which purchased high-priced alumina a couple of months ago were hedging their positions and using the high LME aluminium prices to sell metal forward, a trader for an international company said.

He said Chinese producers avoided import duties by importing raw or semi-finished material and exporting the aluminium end product -- a practice known as tolling.

"We have just concluded deals with smelters which will be selling aluminium metal in February, March and April," he said.

China's physical trade in copper and aluminium was currently slow because of the high world prices and approaching lunar new year in early February, traders said.

Most of China's aluminium processing plants, which are concentrated in the southern province of Guangdong, will be closed for several weeks for the holiday.

A trader for a Chinese company said he thought market players in China had overbought copper and aluminium.

"I think we will see a healthy correction in prices in China in the next one or two weeks," he said. -Reuters