Those who live within the vicinity of Pittsburg when they think about aluminum they think Alcoa and for generations Alcoa dominated the aluminum industry, however the world leadership has shifted to China. China’s share of the global aluminum market has risen from 40% to 60% in the past decade.

According to an article by Andy Home of Reuters, China produced 3.2 million tonnes in April, 8% higher than a year ago and on an annualized basis 39.2 million tonnes according to the International Aluminum Institute (IAI).

Exports continue to flow totalling 1.66 million tonnes in the first quarter of the year.

China is short of aluminum raw material with imports of both primary metal and alloy still strong.

China has been historically a net exporter of aluminum, however last year China imported 1.2 million tonnes of unwrought alloy. Goldman Sachs noted a change in construction materials as the booster for alloy demand. A growing number of provinces have banned the use of timber for casting form work in the channels used to lay concrete. This switch is expected to increase demand by 500,000 tonnes.

Increased appetite for alloy has coincided with reduced imports of scrap aluminum used in alloy production melt. China has relented on its plans to ban completely imports of recyclable metal.

The biggest issue in making aluminum is access to cheap electrical power, hydro dams work great, however China, similar to the rest of the world, there is a desire to decarbonize. China uses coal for its electrical plants, or it has a problem.

China has a low price option which over the past 20 years has squeezed many Western smelters to be closed because they could not compete on price and China would just open up new coal plants and aluminum plants, will that change?

Linking to dividend paying stocks, in raw materials if the government wishes to subsidize an industry in can, but supply and demand will eventually catch up to the official policy, then markets will do what markets will do.

There are more questions than answers, till the next time – to raising questions.