Some China-based producers and traders of nonferrous metals are seeking export opportunities after seaborne prices rose sharply due to the Russia-Ukraine conflict, while losses widened on imports, industry sources said March 4.
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Register NowDomestic Chinese prices of nonferrous metals, such as aluminum, alumina, copper, and nickel failed to keep up with rising seaborne prices following Russia's invasion of Ukraine, making exports of Chinese products profitable. China is typically a net importer of primary aluminum, alumina, copper cathodes, and refined nickel.
The Russia-Ukraine conflict has raised concerns about tightening supplies of nonferrous metals across the globe, lifting seaborne prices.
The pace of increase in the domestic Chinese prices has been relatively slow, as downstream consumers have been wary because of a strong pricing environment and inventory buildup, according to sources.
Copper
The Chinese copper cathode import premium has declined, as domestic demand showed no signs of rebounding and high copper prices led to a closed import arbitrage.
During the Platts Market on Close assessment process from S&P Global Commodity Insights, Platts assessed Chinese copper import premiums at $20/mt plus London Metal Exchange cash, CIF China, March 4, for LME-registered normal brands of electrolytically-refined cathode, down $17/mt week on week and at the lowest level since June 21.
The import losses surged to Yuan 3,000/mt ($475/mt) March 4, leading domestic smelters to turn to exports, market sources said. Many traders were directing shipments to bonded warehouses, causing a significant increase in inventories, according to sources.
Aluminum
A lower ratio between the Shanghai Futures Exchange and the LME prices could boost China's exports of semi-finished aluminum products, sources said. The ratio fell 0.51 day on day to 6.21 at 3:00 pm Beijing time March 4, according to the SHFE data.
The arbitrage opportunity for importing primary aluminum into China has been closed due to widening negative margins following a surge in seaborne prices, sources said. The seaborne prices are not high enough to attract exports of Chinese primary aluminum due to a 15% export tax.
Some Chinese exporters were eying opportunities to ship more semi-finished aluminum products to profit from the market, according to sources.
Alumina
China's alumina import arbitrage widow has also been closed, as seaborne prices rise amid soaring aluminum and supply tightness concerns.
China's alumina might flow to the overseas market amid higher seaborne prices, as domestic refineries resume idled capacity or put new projects into operation, sources said.
Australian alumina was at a $120/mt premium to Chinese production on import-parity terms March 3, based on Platts assessments at $460/mt FOB Australia and Yuan 3,000/mt ex-works Shanxi. The assessment also calculates a freight rate of $63.10/mt to ship 30,000 mt from Western Australia to Lianyungang, China.
Nickel
China's refined nickel import losses continued to widen, reaching about Yuan 16,000-Yuan 18,000/mt March 4.
Market participants were worried that Russia's refined nickel shipments, earlier meant for the EU and US ports, would reach China, at a time when demand from downstream stainless-steel makers is weak, sources said.
The SHFE's and the LME's nickel price ratio dropped to 6.77 March 4, from 7.21 a week ago, the SHFE data showed.
"Though theoretically you could export nickel from China due to the arbitrage, I'm not sure if anyone would do that, as pure nickel metal production is quite small in China," a Chinese trader said.